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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition of Rs. 1,21,73,500/- made under Section 68 of the Income Tax Act. The addition pertained to cash deposits made during the demonetization period, which the AO believed were unexplained.
Held
The Tribunal noted that the assessee is in the construction business and cash withdrawals for deployment are normal. While the possibility of unutilized cash being deposited back cannot be ruled out, the extent of the linkage between deposits and withdrawals required further examination. Since the crucial cash book and related details were not produced before the AO, the matter was remitted back to the AO for fresh adjudication.
Key Issues
Whether the CIT(A) was justified in deleting the addition made under Section 68 for cash deposits during demonetization, when the supporting evidence was produced for the first time before the appellate authorities.
Sections Cited
68
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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SHRI MAHAVIR SINGH
O R D E R
PER AMITABH SHUKLA, AM
This appeal by Revenue is directed against the order of National Faceless Appeal Centre (NFAC), Delhi [for short hereinafter referred to as the "(Ld. NFAC "] dated 26.01.2024 for Assessment Year 2017-18. The word Act hereinafter in this order shall mean the Income Tax Act, 1961.
The only issue contested by the Revenue in the present appeal is regarding the action of the ld CIT(A) in deleting an addition of Rs. 1,21,73,500/- made u/s 68 by the ld AO. The revenue has assailed the order on the premise that the assessee had failed to prove the nature and source of cash deposits and withdrawals in its bank account and that the Page 1 of 6 ARG Infrastructure Pvt. Ltd relief was accorded in the absence of any factual explanation. The ld DR submitted that in this case perusal of assessee’s bank statement showed a deposit of Rs. 1,60,79,500/- during FY 2016-17, out of which Rs. 1,21,73,500/- was made in the months of November and December 2016. The impugned cash deposit ofRs. 1,21,73,500/- was made during the demonetization period announced by the Govt of India. The ld DR submitted that the AO had noted that the assessee was engaged in the business of real estate construction activity. The ld AO noted that average monthly cash deposit between April 2016 to October 2016 was about Rs. 4.19 lacs app whereas in November and December 2016 the same escalated to Rs. 1,21,73,500/- which was more than 29 times of average monthly deposit. The ld AO rejected the argument of the assessee that the impugned cash represents withdrawals made in prior period. The ld DR argued that the relief accorded by ld CIT(A) is not based upon correct understanding and appreciation of the facts of the case. It was argued that the relief has been accorded by drawing inadequate conclusions which were based upon surmises. The ld DR drew reference to para 6.5 of appellate order wherein he had accepted the position that the cash deposit had a direct linkage with the cash withdrawn earlier for use at its Aligarh and Barah Banki (UP) projects. Before the ld CIT(A) the assessee had premised that cash was withdrawn for deployment in its projects, however, on account of sudden demonetization, it could not be utilized and was deposited back. The ld DR argued that the hypothesis propounded by the assessee is not correct and that therefore, the relief accorded is not in order.
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The ld counsel for the assessee before us by and large reiterated the same set of arguments and supported the order of the ld CIT(A). The ld counsel for the assessee before us submitted details in the nature of a cash book to substantiate its arguments of direct linkages between the cash withdrawn and those deposited by it in its bank account during demonetization period. It was argued that perusal thereof alludes that the cash deposit was linked to cash withdrawn earlier. We have noted that the impugned cash book and other details provided by the assessee through its extensive paper book containing some 60 pages show that cash was withdrawn from books and subsequently deposited. The ld DR however, vehemently argued that the impugned details in the form of the alleged cash book, now produced by the appellant were never produced before the lower authorities and that the department should be afforded an opportunity to examine the same before arriving at any decision. The ld counsel for the assessee also conceded that the details and the cash book etc. now filed before us were not available before the ld AO.
We have heard rival submissions in the light of the materials available on the record. The assessee is in the construction business and hence, withdrawal of cash for deployment is a normal business practice. The possibility of some unutilized cash, particularly arising in situations like demonetization, getting deposited back in the bank account also cannot be altogether ruled. The question that however remains is as to how much of the cash deposited is linked to the said withdrawals. The exercise requires extensive examination of the assessee’s cash book etc.now produced. Admittedly the same were not available before the ld AO. Be that as it may Page 3 of 6 ARG Infrastructure Pvt. Ltd be, in the interest of justice we deem it fit to remit the matter back to the file of ld AO for fresh adjudication after giving due opportunity of being heard to the assessee. The decision to remit it back to the Ld. AO is taken in view of the fact that an Assessing Officer is the fulcrum of assessment proceedings. He possesses the first right and responsibilities to examine facts of a case before arriving at his decision qua determination of taxable income in a particular case. Without prejudice it has also been noted that in this case the Ld. AO did not have adequate opportunities to examine the varied facts seminal therein in the light of details/ evidences now produced before us. We have noted with respectful deference the decision of Hon’ble Apex Court in the case of TIN box 249 ITR 216 on the subject matter. Accordingly, the issue of addition qua unexplained share capital which have been contested by the assessee through its grounds of appeal supra stands remitted back to the Ld. AO for fresh adjudication de novo by passing a speaking order and in accordance with law. To the extent the order of lower authorities on this issue stands set aside. The Ld. AO shall give opportunities of being heard to the assessee and it shall be bounden upon the assessee to comply with the notices issued by the Ld. AO. Any non-compliance on the part of the assessee can be adversely viewed. The assessee is at liberty to produce all the evidences filed through its paper book before us including any other evidences deemed relevant in support of its claims before the Ld. AO during the re- adjudication proceedings. Accordingly, all the grounds of appeal raised by the revenue are therefore allowed for statistical purposes.
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In the result, the appeal of the Revenue is allowed for statistical purposes.