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TMI Blog2024 (10) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... at is to be seen is the context of discussion and substance of the issue and if, the discussion points to an issue, then in our considered view the issue needs to be considered. Therefore, we reject the arguments of the assessee along with relevant case laws cited in support of this proposition. Addition made towards cash deposit as unexplained money - Once the AO accepted the advances as genuine in the earlier assessment year, then in our considered view, the AO cannot question the advances received by the appellant in the present assessment year as non-genuine while examining the source of cash deposits into the bank account. This legal principle is supported by the decision of Basetteppa B. Badami [ 2018 (5) TMI 902 - KARNATAKA HIGH COURT] wherein it has been clearly held that when closing balance of cash in hand for the preceding assessment year is sufficient to cover the expenditures in the subsequent year, no addition can be made towards cash deposit as unexplained money. Therefore, in our considered view, the addition made by the AO u/s 68 of the Act, cannot be sustained. Advances received from 6 parties - The appellant has established the transactions with all evidence, inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the AO having noted the fact that the cash balance to the extent of Rs. 4.63 crores is out of past withdrawals from very same bank account, then he should not have rejected the assessee s explanation with regard to source for cash deposits. CIT(A), without considering the said fact, simply sustained the additions made by the AO towards cash deposits on a flimsy ground that the appellant s line of business there would be substantial cash expenditure and that the withdrawals from bank account should have been utilized for cash payments. In our considered view, the said observation of ld.CIT(A) is not based on any evidence, but purely on suspicion and without any valid evidence. Direct the AO to delete the additions made u/s 68. Appeal filed by the assessee is partly allowed. - Shri Manjunatha G. Hon ble Accountant Member And Shri K. Narasimha Chary Hon ble Judicial Member For the Assessee : Shri M.V. Prasad, C.A. For the Revenue : Ms. TH Vijaya Lakshmi, CIT-DR ORDER PER MANJUNATHA G. A.M. This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals) 12, Hyderabad passed on 10.07.2024 for the assessment year 2017-18. 2. The grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the same as one of the sources for the cash deposits made into the bank account during the demonetization period. 8. The ld.CIT(A) is not justified in dismissing the appeal relying on the human probability theory which can be applied when there is inconsistency in the documents submitted. But in the present case direct evidence i.e., statement was also recorded from the creditors. Hence, the Human Probability theory cannot be applied. 9. On the facts and circumstances of the case, the ld.CIT(A) is not justified in not confirming the addition made by the Assessing Officer by treating the bank deposits as unexplained ignoring the fact that bank account was considered while filing the return of income and it is a part of audited Balance-Sheet. 10. On the facts and circumstances of the case, the ld.CIT(A) erred in not appreciating that the sources of cash deposited during the demonetization period of Rs. 4,63,10,000/- represent the cash withdrawals and accumulations of cash balances over a period of years which is evident form the cash balances in the books of accounts. 3. The appellant company, M/s. Jaya Balajee Real Media Pvt. Ltd., is engaged in the business of film production an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded from various persons, observed that although the creditors, who had given advances to the appellant has admitted the fact in their statements recorded during the course of post-search investigation, but the fact remains that all of them have filed returns of income for AY 2016-17 i.e., after the appellant has filed a letter before the ADIT(Investigation) Unit, retracting from his earlier statement recorded during the course of search. Therefore, the Assessing Officer observed that the claim of the appellant regarding receipt of advances from various persons is an afterthought and cannot be accepted. The AO had also discussed the advances received from each and every person in light of income tax returns filed by them along with the financial statements, and come to a conclusion that the persons, who alleged to have paid the advances are having no means to explain such a huge advance given to the appellant. Therefore, the Assessing Officer by applying the theory of human probability, rejected the explanation given by the assessee with regard to advances received from various persons, amounting to Rs. 15.405 crores and also cash balance available as per books of accounts, am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at they had given advances to the appellant. 6. The ld.CIT(A) after considering relevant submissions of the appellant and taken note of the remand report submitted by the AO on additional evidence filed by the assessee, rejected the explanation of the assessee with regard to the source of cash deposit to the tune of Rs. 15,40,50,000/- out of the advances received from seven parties on the ground that the documents seized during the course of search do not indicate any transactions between the appellant and any of the alleged seven creditors / lenders. The alleged creditors have filed the returns of income for AY 2016-17 only in March 2017 i.e., after the affidavit filed by Shri T. Ramesh, which corroborated the findings of the AO that all the creditors are only the name lenders, and it is a make-believable story. The ld.CIT(A) has discussed the issue in light of advances received from each creditor in light of their financial statements and observed that none of the parties have creditworthiness to explain advances given to the appellant, which is evident from the nature of their business and the financial statements filed for the relevant assessment year. Therefore, by following c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make all claims, including deductions towards any expenditure, etc. Therefore, the allegation of the AO that the appellant had filed return of income after the date of search and the books of accounts prepared after the date of search cannot be relied upon is based on suspicion and surmises, but not on facts and evidence. In this regard, he relied upon the decision of Bombay High Court in the case of CIT Vs. Bhaichand N. Gandhi (1982) 11, Taxman 59 (Bom). 10. The learned counsel for the assessee further, referring to the additions made by the AO and sustained by the ld.CIT(A) towards advances from seven creditors, submitted that, as per Section 68 of the Act, additions shall be made towards an unexplained credit in the year, in which the credit is made in the books of accounts. In the present case, the appellant has received advances from various parties in the financial year relevant to AY 2016-17, and the same has been accepted by the AO while completing the assessment for the assessment year 2016-17. Therefore, the AO, after having accepted the advances received in the earlier assessment year and explaining cash balance available as per books, cannot reject the opening cash bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then there is no reason for the AO to reject the explanation offered by the assessee with regard to the source of cash deposits, more particularly, when the creditors have filed confirmations and also admitted in their statements recorded under section 131 of the Act. The learned counsel for the assessee further referring to the decision in the case of P. Chandrasekhar Vs. DCIT (2018) 91-taxman.com 229, submitted that the theory of human probability can be applied when there is an inconsistency in the documents submitted. In order to invoke the theory of human probability theory, inconsistency in the evidence is the key. Therefore, when the evidence filed by the appellant clearly establishes the genuineness of the transactions between the appellant and the creditors, then the evidence filed by the appellant cannot be disregarded by applying the theory of human probability. Therefore, he submitted that the ld.CIT(A) is erred in sustaining the addition made towards unexplained cash credit under Section 68 of the Income Tax Act. Therefore, he submitted that the addition made by the AO should be deleted. 12. Ms. TH Vijaya Lakshmi, CIT-DR, on the other hand, supporting the order of ld.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd indicate that a search and seizer action under Section 132 of the Act, in the case of the appellant was triggered on the basis of credible information with the Department that an amount of Rs. 40.036 crore was deposited in a bank account in Special Bank Notes during the demonetization period. During the course of search, a statement on oath was recorded from T. Ramesh on 02-01-2017, wherein he had come forward to declare of Rs. 40 crores under PMGKY, 2016. The director of the appellant company has confirmed this declaration under PMGKY in the subsequent statements recorded on 03-01-2017, 17-01-2017 and 24-02-2017. However, he has filed a written retraction along with an affidavit on 03-03-2017 and declared Rs. 20 crores under PMGKY, 2016 and the balance amount of cash deposit of Rs. 20.036 crores has been explained out of known source of income, including advances received from various persons in financial year 2015-16 relevant to assessment year 2016-17 and also out of cash balance available as per books of accounts. The ADIT, (Inv) has summoned all seven parties from whom the appellant has claimed to have received advances during the course of post search investigation and rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 14. Coming back to the explanation with regard to source of cash deposit. There is no dispute with regard to the fact that the appellant has received Rs. 14,59,50,000/- from 6 parties as advances in the financial year 2015-16, relevant to assessment year 2016-17, and these advances are recorded in the books of accounts of the assessee for the financial year ended 31-03-2016. The appellant had also, received Rs. 81,00,000/- from one party for the FY 2016-17 relevant to AY 2017-18. Admittedly, the assessment for A.Y 2016-17 is abated as on the date of search. As per 2nd Proviso to Section 153A of the Act, once the assessment is abated as on the date of search, then it is as good as a fresh assessment for all the purposes, including for the purpose of invoking Section 139(1) of the Act, as has been clearly brought out under Section 153A(1)(a) of the Act, where it has been clearly stated that return filed in response to a notice under Section 153A shall be treated as if, the said return were required to be furnished under Section 139(1) of the Act 1961. Once the assessment is abated and for the first time, the AO is assessing the income of the assessee for that assessment year, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant has furnished all the evidence and also the parties have confirmed advances given to the appellant in the statements recorded under Section 131 of the Act. However, the AO rejected the evidence filed by the assessee to explain the advances received from seven parties only on the ground that the documents seized during the course of search do not indicate any transactions between the appellant and alleged seven parties. In our considered view, the reasons given by the AO to reject the advances received from seven parties are incorrect for the simple reason that, at the first instance itself, in the statement recorded under Section 132(4) of the Act, T. Ramesh, Director of the appellant company has claimed that he has received advances from various parties. Although, he could not specify the names of the persons from whom he has received advances during search, but during subsequent post search investigation, he has filed complete details of names of the persons from whom he has received the advances. The appellant has also filed additional evidence, including the confirmation letters from the parties. Therefore, once the appellant has filed all the evidence, and the AO did not d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, by following the above case, the additions made by the Assessing Officer should be sustained. We have gone through the order of the co-ordinate Bench in the above case and find that the facts of the present case and facts before the Tribunal in the above case are entirely different. In the above case, the assessee claims to have received huge advances from customers for sale of gold during the demonetization period and on examination, it was found that advances claimed to have been received from customers are non-genuine and further, there is a clear finding from the Tribunal that the assessee had no / negligible stock-in-trade as on 08.11.2016 and further, the purchase of gold has been made after deposit of cash into bank account. Under those facts, it was held that the appellant is not able to explain advances received from customers with relevant evidence. In the present case, there is no dispute with regard to the fact that advances received from seven persons has been explained with relevant documents and also the parties have confirmed the transactions. Therefore, we have to consider that the facts are entirely different in the present case when compared to the case l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant has prepared books of accounts after date of search and there is a possibility of dressing up the books of accounts to cover up the source of cash deposits. In our considered view, the reasons given by the AO is fallacious for the simple reason that, unless AO proves with necessary findings that the cash balance available in the books of accounts is not backed by any evidence, including withdrawals from the bank account or the said cash in hand has been utilized or appropriated for any other purposes, the cash balance available as per books of accounts cannot be denied merely for the reason that the said books of accounts has been audited or prepared after the date of search. Further, as we have already noted in earlier paragraphs of this order, the assessment for the assessment year in question is the year of search and also the assessment for the assessment for A.Y. 2016-17 is also abated as on the date of search, in our considered view, the appellant can file a true and correct return of income for the said assessment year, which may be prepared after the date of search. Therefore, merely for the reason that the book of accounts has been prepared and audited after the date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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