2023 (8) TMI 419 - AT - Income Tax

Tribunal allows appeal, removes Rs. 45L addition under Income Tax Act

The tribunal allowed the appeal filed by the assessee, deleting the addition of Rs. 45,00,000 under section 69A of the Income Tax Act. It emphasized that ... Addition of deposit into bank during demonetization period u/s 69A - as per assessee transaction has recorded in books of accounts with proper source of deposit and the amount has been deposited out of cash withdrawn from bank and available as cash in hand - HELD THAT:- The cash in hand is available with the company after wages and salary for the month of October and therefore we note that addition made by AO is not correct. We note that assessee’s books of account were not rejected by the AO and hence books result are genuine, therefore once the AO has accepted the books of accounts as genuine, the cash balance shown in the cash book should not be treated wrong (not genuine), as the cash book is a part of audited books of accounts. We note that amount was kept by assessee-company for meeting the requirement of expenses and contingency as per policy of company as depict from above and allegation of AO for keeping cash over a long period is not correct as mention in the Assessment order. AO had not able to brought any evidences on record which prove that cash in hand was not available with the company on the date of deposit of said amount into bank and moreover cash book having been accepted as genuine by assessing officer, it is proved that cash was available with the assessee-company on the fact of the case and hence the addition cannot be made arbitrary. See ATUL GUPTA V/S ITO [2004 (6) TMI 641 - ITAT DELHI] wherein held that where assessee had explained source of availability of cash with him to deposited into bank accounts, there was no reason to doubt correctness of the claim and no addition on that account could be made to assessee`s income. Thus we note that cash in hand recorded in books of accounts and on the basis of which assessee has been filing the Income tax return, hence in such cases addition should not be made. - Decided in favour of assessee. Issues Involved:1. Validity of the vague show cause notice.2. Justification of the addition of Rs. 45,00,000/- under section 69A of the Income Tax Act, 1961.Summary:Issue 1: Validity of the vague show cause noticeThe appellant contended that the Learned Commissioner of Income Tax (Appeals) [CIT(A)] failed to provide a 'speaking finding' on the issue of the vague show cause notice. However, the tribunal did not find any merit in this argument, noting that the notice issued by the Assessing Officer (AO) specifically inquired about the cash deposits of Rs. 45,00,000/- during the demonetization period, and there was no contradiction in the addition made by the AO.Issue 2: Justification of the addition of Rs. 45,00,000/- under section 69AThe assessee, a Private Limited Company engaged in the dyeing and printing business, deposited Rs. 45,00,000/- in its bank accounts during the demonetization period. The AO treated this amount as unexplained money under section 69A of the Income Tax Act, 1961, on the grounds that the assessee failed to satisfactorily explain the source of the cash deposits. The AO observed that the cash withdrawn before Diwali was likely used for wages and salaries, and the deposited cash was not from those withdrawals.The assessee argued that the cash deposited was from the opening balance and cash in hand, which was substantiated by the cash book showing a sufficient balance. The tribunal noted that the books of accounts were subject to statutory audit and the cash book's opening and closing balances were verified by the auditor, thus establishing the genuineness of the cash book.The tribunal also considered a comparative analysis of cash withdrawals and expenses for previous years, which showed no abnormality. It concluded that the cash deposited during the demonetization period was from the cash in hand available with the assessee-company, and the AO failed to provide evidence to the contrary.Citing the case of ATUL GUPTA V/S ITO [142 TAXMANN.COM 36 (ITAT DELHI)], the tribunal held that where the source of cash is satisfactorily explained, no addition should be made. Therefore, the tribunal deleted the addition of Rs. 45,00,000/- made by the AO.Conclusion:The appeal filed by the assessee was allowed, and the addition of Rs. 45,00,000/- was deleted. The tribunal emphasized that the cash in hand recorded in the books of accounts, which were accepted as genuine, should not be arbitrarily treated as unexplained income.