TaxTMI 
TaxTMI 
2025 (8) TMI 1810
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....ocuments along with various explanations called for by the Assessing Officer (AO). The Assessing Officer noticed that the assessee had made huge cash deposits during the demonetization period and prior to that, there were frequent cash withdrawals also by the assessee. The assessee was required to explain the reason behind such huge cash deposits. In response to the query by the Assessing Officer, the assessee submitted that maintaining such huge cash deposits was in line with the nature of business of the assessee and that the assessee had to maintain such huge cash balances in view of the assessee having its work spread out throughout the Country at different locations and sites and, therefore, cash was required to meet the daily expenses at those sites as well as for the purpose of making advances to various employees. It was further submitted by the assessee before the AO that these cash balances were maintained by withdrawing cash from bank as and when the need arose and that the same was evidenced by various cash withdrawals made during the year. It was further submitted that the assessee had to deposit the entire cash in the bank account in view of demonetization declared by....
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....ping such high cash in hand when there was no requirement to make payments in cash. It was noted that the major cash payments were done by the appellant in the month of March every year and the appellant had never hoarded such cash. The AO noted that despite having substantial cash with it, the appellant again withdrew substantial amounts in October & November 2016. The AO noted that a very negligible part of the expense debited in the P&L accounts were paid in cash hence there was no need for withdrawing such huge amount of cash. The AO noted that despite having opening cash of Rs. 1.25 cr. the appellant carried on withdrawing cash and the closing balance was Rs. 2.75 crores. There was no justification for such withdrawals. The AO held that this recurrent withdrawal made by the assessee only indicate one thing that the assessee had been withdrawing cash for some expenditure or urgent purpose to tend to and had made payments towards that particular expenses. However, when demonetization came in, assessee found a way to accommodate its unaccounted cash lying with it by explaining cash withdrawals made by it during various months. The AO held that the withdrawal made for Rs....
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....n. However, it is pertinent to note here that the appellant has already submitted that no cash payments are received by it. With regards to the purpose of the withdrawal it was stated that it was model of the business which necessitated the withdrawal. It is a settled law that the AO should not step into the shoes of the business man and beside what is correct for the business. It is not the business of the AO to raised doubt on the purpose of the withdrawal as long as the source is well substantiated. In this case the cash deposited in the bank was made out of the cash withdrawals from the bank. This facts has been accepted in the assessment order itself but the addition has been made only on presumption of the AO. The AO has not rejected the books of account of the appellant neither has she pointed out any discrepancy in the same. The AO has made the addition under the provision of section 68 of the Act. A perusal of the section 68 of the Act shows that if any credit of an amount is found in the books maintain by the assessee and if the explanation offered by the assessee is not satisfactory then the same can be considered as unexplained by the AO. However, the satisfact....
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....e Department's appeal deserved to be allowed. 6. In response, the ld. authorized representative for the assessee submitted that the ld. First Appellate Authority had allowed the assessee's appeal after duly considering the various submissions and evidences filed by the assessee. It was submitted that the assessee is engaged in rendering services to Electricity Boards and State Power Corporations and was having site offices throughout the Country and for the purpose of carrying out the work, it was incumbent upon the assessee to maintain huge cash balances. It was further submitted that the assessee company regularly keeps on withdrawing cash from its bank accounts depending upon the nature of project and business. It was submitted that the fact of huge cash withdrawals throughout the year was also evident from the chart reproduced by the Assessing Officer at page 11 of his order and as referred to by the ld. Sr. D.R. also. It was further submitted that the assessee had been awarded several new contracts between June, 2016 and October, 2016 which led to requirement of increased amount of cash in hand during the period. It was also submitted that the assessee had in earlier assess....
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....s and State Power Corporations throughout the Country, the assessee has to maintain cash in hand at various locations and sites throughout the country for the purpose of maintaining liquidity for routine expenditure as well as for the purpose of advances to various employees and that for this purpose the assessee regularly withdraws cash from the Bank account. It has also been urged that the assessee has been regularly following this practice in earlier assessment year (AY) i.e. AY 2016-2017 as well as in subsequent assessment year AY 2018-2019. It has been argued that the nature of business of the assessee makes it imperative that huge cash balances are maintained to meet the daily requirement as well as for meeting any other exigency. It has been further argued that the impugned cash deposit on 11.11.2016 had become a necessity in view of the demonetization announced by the Government of India on 08.11.2016. 9. We have seen that the assessee had offered a similar explanation before the AO vide explanation dated 19.12.2019 wherein the assessee had duly explained its business model and had also submitted month-wise details of opening cash in hand and cash withdrawals as well as ....
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....y 1125868 666549 300000 0 1136641 955776 17-Jun 955776 1108000 200000 0 833465 1430311 17-Jul 1430311 383000 2000000 0 1461982 2351329 17-Aug 2351329 618000 600000 0 2663522 905807 17-Sep 905807 537000 1600000 0 2418045 624762 17-Oct 624762 780000 2800000 0 3584579 620183 17-Nov 620183 734500 2800000 0 2537553 1617130 17-Dec 1617130 405000 2000000 0 1767810 2254320 18-Jan 2254320 325740 600000 0 1675660 1504400 18-Feb 1504400 154000 4700000 0 4882231 1476169 18-Mar 1476169 352000 21900000 0 23673894 54275 10. A perusal of the above would show that the assessee had sufficient cash in hand in its books on 08.11.2016 which was subsequently deposited on 11.11.2016. As records show, the AO has not at all disputed the veracity of the cash book nor has doubted that cash was available in the books of the assessee on 08.11.2016. It is also noteworthy that the books of account have not been rejected by the AO. It is also seen that the Managing Director of the asses....
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....ssment under section 23(3) he is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all and there must be something more than bare suspicion to support the assessment under section 23(3). The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. CIT [1944] 12 393. In the instant case, the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the assessee to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result was that the assessee had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the ITO and the Tribunal, was based on surmises, suspicions and conjectures. The Tribunal took from the representative of the department a statement of gross profit rates of other cotton mills but did not show that statement to the assessee did ....