RAKESH KUMAR SHARMA,NEW DELHI vs. ITO, WARD-61(4), NEW DELHI

The dispute in the present appeal is confined to addition of an amount of Rs.9,44,200/- under section 68 of the Income-tax Act, 1961 (for short ‘the Act’).

Briefly the facts are, the assessee is a resident individual and is a practicing advocate. For the assessment year under dispute, the assessee filed his return of income on 31.12.2014 declaring income of Rs.2,50,999/-. In course of assessment proceeding, the Assessing Officer, on verifying the details available on record, found that in the year under consideration, the assessee had deposited cash amounting to Rs.52,93,200/- in his bank accounts. Whereas, the assessee has shown gross professional receipts of Rs.24,89,567/-. Noticing this, he called upon the assessee to explain the source of cash deposits in the bank accounts. In response to the query raised, the assessee submitted that it had opening cash balance of Rs.73,48,191/-, which was shown in the return of income filed for the preceding assessment year 2013-14. In support of such claim, the assessee furnished the cash book for the impugned assessment year. On verifying the cash book, the Assessing Officer noticed that in the year under consideration, the assessee has made withdrawals of Rs.43,51,000/-. Therefore, he treated the difference of Rs.9,44,200/- between the cash deposits of Rs.52,93,200/- in his bank account and the withdrawals made as unexplained cash credit.

I have considered rival submissions. On perusal of material on record, it is evident, before the Assessing Officer, the assessee had 2 | P a g e explained that the cash deposits were out of opening cash balance available with the assessee. In support of such contention, the assessee has produced the cash book for the impugned assessment year. The Assessing Officer has not recorded any adverse observation regarding assessee’s claim that he had opening cash balance of Rs.73,48,191/-. Even, the Assessing Officer has not recorded any adverse finding with regard to the entries made in the cash book for the assessment year 2014-15. It is further observed, before learned Commissioner (Appeals), the assessee has furnished a chart showing monthly cash balance available during the year. Learned Commissioner (Appeals) has also recorded a finding that the professional receipts as well as rental income were also received in cash.

This, in my view, is unacceptable. When the departmental authorities have not controverted assessee’s claim regarding availability of cash by way of opening balance as well as cash receipts from professional and rental income, the addition 3 | P a g e representing the difference between the cash deposits and withdrawals cannot be treated as unexplained cash credit under section 68 of the Act. Moreso, when the assessee has established the source of such deposits from available cash balance. In view of the aforesaid, I delete the addition of Rs.9,44,200/-.

In the result, the appeal is allowed.