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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B” : HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI A. MOHAN ALANKAMONY
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B” : HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
I.T.A. No. 1426/HYD/2019 Assessment Year: 2016-17 Thallam Venkata Income Tax Officer, Narasimhulu, Vs Ward-2, KADAPA KADAPA [PAN: AABHT6821M] (Appellant) (Respondent)
For Assessee : Shri K.K. Gupta, AR For Revenue : Shri Rajat Mitra, DR Date of Hearing : 19-11-2019 Date of Pronouncement : 27-11-2019
O R D E R PER Smt. P. MADHAVI DEVI, J.M. : This is assessee’s appeal for the AY.2016-17, directed against the order of the Commissioner of Income Tax (Appeals)-Kurnool, dated 02-08-2019.
Brief facts of the case are that, the assessee, an individual, deriving income from the business of money lending, filed his return of income for the AY.2016-17 on 20-06-2017, declaring his income at Rs.2,78,110/-. Subsequently, the case was selected for scrutiny through CASS with a reason ‘Whether the cash deposits made during demonetization period has been made from disclosed sources?’.
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Hence, a notice u/s.143(2) of the Income Tax Act [Act] was issued and the assessment proceedings u/s.143(3) of the Act were initiated. The assessee was required to furnish copies of the Bank accounts, list of Sundry Debtors and other relevant documents. Assessee filed the same and on verification of the same, the Assessing Officer (AO) noticed that the assessee has shown cash on hand at Rs.5,07,181/- in the Balance Sheet as on 31-03-2016. In order to verify the claim of the assessee, cash in hand shown in the previous assessment years also was compared along with the dates of filing the returns of income. The details are as under:
S.No Financial Cash on hand Date of return of Year ending admitted in income filed for Rs. the relevant assessment year 1 31-03-2014 1,04,127 05-03-2016 2 31-03-2015 5,01,039 03-03-2017 3 31-03-2016 5,07,181 20-06-2017
2.1. The AO observed that the assessee has increased cash in hand from Rs.1,04,127/- as on 31-03-2014 to Rs.5,01,039/- as on 31-03-2015 and also that the return of income was filed for the AY.2015-16 on 03-03-2017 and for the AY.2016-17. The cash on hand was shown at Rs.5,07,181/- and the return of income was filed on 20-06-2017. He also noticed that during the demonetization period, the assessee has deposited cash to the extent of Rs.10,30,000/- and that in order to cover up the cash balance, the assessee has increased cash balance as on 31-03-2015 to Rs.5,01,039/- suddenly and accordingly filed his returns of income for the AYs.2015-16 and 2016-17, much
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later than the due date and after demonetization, the AO therefore required the assessee to furnish details with regard to cash balance of Rs.5,07,181/- as on 31-03-2016. Since the assessee did not file any details other than names and places of the debtors, from whom he has allegedly realized the amounts, the AO held that the assessee has failed to explain the sources for the cash on hand of Rs.5,07,181/- as on 31-03-2016. Accordingly, the AO brought it to tax.
Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the order of the AO and the assessee is in second appeal before us.
Ld.Counsel for the assessee submitted that the assessee is in the business of money lending and had sundry debtors in the earlier assessment years, from whom he has realized money and in the returns of income for the AY.2015-16, the assessee has shown the closing balance of cash on hand at Rs.5,01,039/-. When the closing balance of the earlier year has been accepted by the AO, without making any disallowance, then the same should be accepted as the opening cash balance and addition of the cash on hand as on 31-03-2016 cannot be made in the AY.2016-17. He has filed before us the cash flow statement for the FYs.2014-15 and also 2015-16 to demonstrate that there was a closing balance of cash of Rs.5,01,038/- as on 31-03-2015 and thus, the cash on hand as on 31-03-2016 is explained.
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Ld.DR, on the other hand, submitted that the return of income for the earlier assessment year has also been filed after the demonetization period and in order to cover up the cash deposits post demonetization period, the assessee has increased the cash in hand as on 31-03-2015. Therefore, the same should not be accepted.
Having regard to the rival contentions and material on record, we find that the assessee is engaged in the business of money lending and therefore assessee cannot be expected to be without any cash in hand at the end of the relevant assessment year. The assessee has been showing closing balance of cash in hand even for the earlier assessment years and as evident from the assessment order, the cash in hand admitted in the financial year ending 31-03-2014 was Rs.1,04,127/- and as on 31-01-2015 it was Rs.5,07,181/-. As seen from the books of account, the assessee had sundry debtors of Rs.24,39,100/- and cash in hand of Rs.5,01,038/- as on 31-03-2015 and the assessee has offered the net income of Rs.2,89,394/- for the relevant assessment year. The returned income of the assessee has been accepted by the Department as the return was not picked up for scrutiny. For the AY.2016-17, the assessee has adopted the closing cash in hand of FY.2014-15 as the opening balance of the FY.2015-16 and having advanced Rs.4 Lakhs as loans during the FY.2015- 16, the sundry debtors were shown at Rs.28,39,100/- in the Balance Sheet ended 31st March, 2015. The cash flow statement thus demonstrates the sources of the funds with the assessee. Thus, the cash in hand of Rs.5,07,182/- as on
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31-03-2016 cannot be doubted merely because of deposits into the assessee’s bank account during the demonetization period. In view of the same, we allow the assessee’s appeal and the addition of Rs.5,07,181/- made by the AO, confirmed by the Ld.CIT(A) is deleted.
Order pronounced in the open court on 27th November, 2019
Sd/- Sd/- ( A. MOHAN ALANKAMONY ) ( P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 27-11-2019 TNMM
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Copy to : 1. Sri Thallam Venkata Narasimhulu, Kadapa C/o.K.K.Gupta, FCA, Chartered Accountants, 3464, Dundoo Vihar, R.P.Road, Secunderabad.
The Income Tax Officer, Ward-2, Kadapa.
CIT(Appeals)-Kurnool.
The Pr.CIT-Kurnool.
D.R. ITAT, Hyderabad.
Guard File.