2023 (8) TMI 1454 - AT - Income Tax

ITAT dismisses Revenue's appeal on Section 68 addition for demonetization cash deposits citing legitimate source evidence

The DCIT, Central Circle-29, New Delhi Versus M/s. Atulah Contractors and Construction Pvt. Ltd.,

The DCIT, Central Circle-29, New Delhi Versus M/s. Atulah Contractors and Construction Pvt. Ltd., - TMI Issues Involved:1. Whether the CIT(A) erred in law and on facts by ignoring the lack of documentary evidence for cash payments.2. Whether the CIT(A) erred by ignoring Section 68 of the Income-tax Act, 1961, regarding the burden of proof.3. Whether the CIT(A) erred by not considering the impounded documents showing cash-in-hand.4. Whether the CIT(A) erred by ignoring the pattern of cash deposits and the lack of documentary evidence for cash balances at site offices.5. Whether the CIT(A) erred by not discussing the cash in hand as per impounded documents.6. Whether the CIT(A)'s order is perverse, erroneous, and untenable on facts and in law.Summary:1. Lack of Documentary Evidence for Cash Payments:The Revenue argued that the assessee did not produce any documentary evidence for payments made for wages, despite claiming the need for cash in hand as a construction contractor. The CIT(A) was alleged to have ignored this fact.2. Burden of Proof Under Section 68:The Revenue contended that the CIT(A) ignored Section 68 of the Income-tax Act, 1961, which places the primary burden of proof on the assessee to prove the genuineness of transactions. The CIT(A) was accused of shifting this burden to the Revenue.3. Impounded Documents Showing Cash-in-Hand:The Revenue pointed out that impounded documents from M/s Omaxe Limited showed cash-in-hand figures that did not match the assessee's claims. The CIT(A) allegedly ignored these documents.4. Pattern of Cash Deposits and Lack of Evidence for Site Office Balances:The Revenue argued that there was no pattern of such huge cash deposits in previous years and that the assessee did not produce documentary evidence to support cash balances at site offices. The CIT(A) was said to have ignored these facts.5. Discussion on Cash in Hand as per Impounded Documents:The Revenue claimed that the CIT(A) did not discuss the cash in hand as per impounded documents and focused only on the data provided by the assessee.6. Perversity and Erroneous Nature of CIT(A)'s Order:The Revenue asserted that the CIT(A)'s order was perverse, erroneous, and untenable on facts and in law.Findings:1. Explanation of Cash Deposits:The CIT(A) found that the cash deposited pre- and post-demonetization was duly explained by the assessee. The cash balance as on 08.11.2016 was created by opening cash balance as on 01.04.2016 and cash withdrawals from the bank account till 08.11.2016.2. High Cash Balance and Business Prudence:The CIT(A) noted that the assessee usually maintained a high cash balance, which was evident from the opening cash balance as on 01.04.2016 of Rs. 1,70,45,310/-. This practice was considered a matter of business prudence, not to be questioned by the Assessing Officer.3. Comparison of Cash Withdrawals and Deposits:The CIT(A) compared cash withdrawals and deposits for FY 2015-16 and FY 2016-17, finding that the assessee consistently maintained huge cash balances. The cash withdrawals were higher than the cash deposits, supporting the assessee's claims.4. Acceptance of Cash Books:The CIT(A) accepted the site cash books and main cash book provided by the assessee, showing a total cash balance of Rs. 2,45,41,259/-. The cash deposited in the bank was explained by the opening cash balance and cash withdrawals, which were undisputed.Conclusion:The Tribunal upheld the CIT(A)'s findings, agreeing that the assessee successfully demonstrated the source of cash deposits during the demonetization period. The appeal of the Revenue was dismissed, and the CIT(A)'s order was upheld. The Tribunal found no ambiguity, perversity, or valid reason to interfere with the CIT(A)'s findings.