/S ORANGE AQUA POLY PRODUCTS P LTD ,CHENNAI vs. DCIT , CORPORATE CIRCLE - 5(1) , CHENNAI

आदेश / O R D E R PER MANJUNATHA.G, AM: This appeal filed by the assessee is directed against the order of the

Commissioner of Income Tax (Appeals)-18, Chennai, dated 11.07.2022

and pertains to assessment year 2017-18.

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in the business of manufacturing and trading, filed its return of income for

the AY 2017-18, on 21.07.2017 declaring total income of Rs.NIL with a

current year loss of Rs.1,05,71,326/-. The case was selected for scrutiny

and during the course of assessment proceedings, the AO noticed that the

assessee has deposited cash of Rs.2,09,94,500/- in its bank account during

demonetization period and thus, called upon the assessee to explain source

for cash deposits. In response, the assessee submitted that source for cash

deposits was out of withdrawals from NRO bank account of Managing

Director, Mr.K. Ananthan, and said cash withdrawals was for the purpose

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of factory restructuring work. The AO was not convinced with the

explanation of the assessee and according to the AO, the assessee could

not file any evidences to prove that cash withdrawals from NRO account of

Managing Director and the same has been brought into books of accounts

of the company and deposited in bank account. Therefore, cash deposit of

Rs.2,09,94,500/- has been treated as unexplained money u/s.69A of the

Income Tax Act, 1961 (in short “the Act"), and levied tax u/s.115BBE of

the Act.

Authority, but could not succeed. The Ld.CIT(A) for the reasons stated in

their appellate order dated 11.07.2022, has sustained the additions made

by the AO towards cash deposits on the ground that the assessee could not

explain source for cash deposits, even though, claims to have been received

cash from the Managing Director. Further, the assessee could not file any

confirmation letter from the Director in support of claim and also cloud not

explain ‘as to why’ cash withdrawn from the Director’s account in the month

of February-March, 2016 was kept until demonetization period in the month

of December, 2016, for a gap of 9 months. Therefore, rejected the

arguments of the assessee and sustained the addition made by the AO.

The relevant findings of the Ld.CIT(A) are as under:

5.4 I have considered the submissions of the appellant. The appellant had not substantiated the submissions made with any documentary evidence. Firstly, the appellant had not produced the bank statements of the Director evidencing withdrawal of the amount from his NRO account and has not explained the purpose for which such amounts were withdrawn by the Director. No confirmation letter was produced from the Director in support of "the submission that he has withdrawn the amount from the bank

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and given to the company. Further, though the appellant had referred cash book maintained by the appellant firm, it has not chosen to file the same in the appeal proceedings. The submission of the appellant that it had taken the funds from the Director for restructuring of company factory was also not proved with any evidence much less documentary evidence. If the funds from director's bank account are taken for restructuring work of the company, what prevented account transfer of the funds from director's bank account to company's bank account? Why should it be first withdrawn in cash from director's bank account and then cash has to be deposited in company's back account. All these defies the logic. In fact, even according to the appellant the project was not successful and not happened at all. It is further noticed that the withdrawals by the Director in his bank account was in Feb-March, 2016 whereas the amount was deposited by the appellant company in the bank account in December, 2016 after a gap of more than 9 months. It is also not clear whether the amounts were given immediately to the company by the Director. If that be so, when the amount given earlier on 20/02/2016 of Rs.50 lakhs was not utilized for the intended purpose, there is absolutely no need for further withdrawals and depositing the same in the company's account. The claim of the appellant seems to be not an acceptable explanation. The appellant had not also submitted its financials to show that the company had cash balance as on 31/03/2016 and as on the date of demonetization.

5.5 It is true that the citizens were allowed to deposit the demonetized currency before 30/12/2016 and that does not lead to the conclusion that the amounts so deposited were all accounted money.

5.6 All things considered, the inevitable conclusion in this case is that the appellant had not discharged his burden of proving the source for the demonetized currency deposited in the bank accounts during demonetization period and the AO was therefore quite justified in assessing the same as unexplained money under section 69A of the Act. As the addition is u/s. 69A, Section 115BBE has been rightly invoked in this case. As several opportunities of being heard were given to the assessee both during the assessment proceedings by the AO and during appellate proceedings by the undersigned, the ground on principles of natural justice is devoid of merit.

not appreciating the fact that source for cash deposits was out of cash

received from Director, Mr.K. Ananthan, where he had withdrawn from his

NRO A/c. The assessee further referring to ledger account of Managing

Director Mr.K. Ananthan in the books of accounts of the assessee submitted

that amount received from Director has been credited to his account and

shows under ‘trade payables’. The assessee has explained source for cash

deposits with necessary evidences, including confirmation from the

Director. However, the AO & the Ld.CIT(A) rejected the arguments of the

assessee and sustained the additions made by the AO only on the ground

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that the assessee could not explain the reasons for cash withdrawals in the

month of February to April, 2016 and deposited in the month of December,

2016.

submitted that the assessee could not explain source for cash deposits with

valid reason, although, claims to have been received cash from Director

Mr.K. Ananthan. The assessee could not have been filed confirmation from

the Director and also failed to explain how cash withdrawals from Director’s

personal bank account, has been routed in the books of accounts of the

assessee. Therefore, the AO has rightly made addition towards cash

deposits and their orders should be upheld.

record and gone through orders of the authorities below. The AO has made

addition towards cash deposits into bank account during demonetization

period on the ground that the assessee could not explain source for cash

deposits. It was the arguments of the assessee before the AO that the

source for cash deposits is out of cash received from Managing Director,

Mr.K. Ananthan, where he has drawn amount from NRO Bank A/c

maintained with Canara Bank. We find that the assessee has filed NRO A/c

maintained with Canara Bank of Mr.K. Ananthan where cash withdrawals of

Rs.50 lakhs on 20.02.2016 and cash withdrawals of Rs.1 Cr. On 03.03.2016

was noticed. We further noted that the assessee has filed ledger extract of

Director’s current account in the books of accounts of the company and

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explained that on 22.12.2016, 30.12.2016 & 30.12.2016, the company has

received cash from Managing Director, Mr.K. Ananthan. We find that

although, the assessee has filed ledger account of Mr.K. Ananthan in the

books of accounts of the company but fail to file cashbook extract of the

company for above period to prove that cash received from Managing

Director has been routed through cash book before depositing into bank

account. Further, the assessee could not explain how cash withdrawn by

the Managing Director in the month of February, 2016 has been brought in

the books of accounts of the assessee company in the month of December,

2016. Therefore, we are of the considered view that the observations of

the AO that the assessee could not satisfactorily explained source for cash

deposits, appears to be correct, because, the assessee could not file any

evidences before the AO, including ledger account copy of the Managing

Director in the books of accounts of the assessee. However, fact remains

that if you go by evidences filed by the assessee, including ledger account

of Mr.K. Ananthan in the books of the assessee company, there are three

entries of cash receipts on two different dates before the date of cash

deposit into bank account and their evidences were not filed before the AO.

Further, the assessee could not explain ‘as to why’ current account of the

Director has been classified under the head ‘trade payables’. Therefore, we

are of the considered view that the matter requires further examination

from the AO in light of evidences filed by the assessee. Thus, we set aside

the order of the Ld.CIT(A) and restore the issue to the file of the AO and

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direct the AO to re-examine the claim of the assessee in light of certain

evidences filed by the assessee during the course of hearing and decide the

issue afresh in accordance with law.

purposes.

Order pronounced on the 28th day of February, 2023, in Chennai.

Sd/- Sd/- (वी. दुगा� राव) (मंजूनाथा.जी) (MANJUNATHA.G) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 28th February, 2023. TLN आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 4. आयकर आयु�/CIT 2. ��यथ�/Respondent 5. िवभागीय �ितिनिध/DR 3. आयकर आयु� (अपील)/CIT(A) 6. गाड� फाईल/GF