DIAMOND BUILDERS,SANTACRUZ (W) vs. WARD 25 (2) (3), MUMBAI

At the outset, I noticed that there is a delay of 89 days in filing the appeal before the Tribunal. In this regard, the assessee has placed on record an affidavit.

I have heard the counsel for both the parties and perused the material placed on record and also the affidavit filed by the assessee explaining the delay. Considering the entire factual position as explained before me and also keeping in view the principles laid down by the Hon’ble Supreme Court in the case of Collector, Land Acquisition, Anantnag & Ors. vs. Mst. Katiji & Ors., 1987 AIR 1353 (SC), wherein it has been held that where substantial justice is pitted against the technicalities of non-deliberate delay, then in that eventuality substantial justice is to be preferred. In my view, the principle of advancing substantial justice is of prime importance. Hence, considering the explanation put forth by the assessee by justifiably and properly explaining the delay which occurred in filing the appeal and considering the expression “sufficient cause” liberally, I am inclined to condone the delay in filing the appeal before the Tribunal. Consequently, the delay is condoned and the appeal is admitted to be heard on merits.

Ground No. A (1 to 5) raised by the assessee are interconnected and relate to the challenge to the order of learned CIT(A) in upholding the additions made by the AO on account of unexplained cash credit.

In this regard, I have heard the counsel for both the parties and perused the material on the record, judgments cited before me and also the orders passed by the Revenue Authorities. From the records I noticed the additions in this case were made under Section 69A of the Income Tax Act on account of the fact that the assessee had deposited cash of Rs. 36,80,000 in its bank account and, according to the Revenue, on verification of the return of income for the year under consideration, it was found that the assessee had deposited a huge amount of cash in its bank account from unexplained sources. In this regard, it was also mentioned that the cash deposit of the assessee was not out of cash-in-hand during Financial Year 2015–16, as alleged by the assessee, whereas as per the case of the Revenue, on verification, it was found that the closing cash-in-hand during Financial Year 2015–16 relevant to Assessment Year 2016–17 was nil, and the assessee had utilized all the cash that was withdrawn during Financial Year 2015–16, and no cash was carried forward to the next year. It was also found that the assessee had not carried out any business during the year under consideration, and hence the defence set up by the assessee was not believed to be correct, and consequently the additions were made, which were ultimately upheld by the Ld. CIT(A).

Whereas, on the contrary, the assessee specifically submitted that the opening cash-in-hand as on 01.04.2015 with the assessee was Rs. 3900, and during March 2016, in connection with a proposed business venture/requirements, the assessee withdrew cash from its bank account through self-cheques, and the withdrawals were duly evidenced by bank statements and corresponding self-cheques. In this regard, the documents that were referred to by the assessee are at paper book page numbers 86, 95 to 103, and 129.

In all, the assessee had withdrawn Rs. 34 lakhs from the bank, and the said withdrawals were duly reflected in the bank statements of the assessee for the month of March 2016. It was submitted by the assessee that the corresponding entries for the aforesaid withdrawals were duly recorded in the regularly maintained cash book of the assessee for Financial Year 2015– 16, resulting in closing cash-in-hand of Rs. 34,03,900 as on 31.03.2016. The assessee has also relied upon the balance sheet as on 31.03.2016, which also separately disclosed the cash-in-hand of Rs. 34,03,900 and the bank balance of Rs. 1,37,137. Thus, in this way, the availability of cash stood proved not merely by the cash book, but also in the financial statements.

It was specifically submitted by the assessee that the entire controversy had arisen as, while electronically filing the return of income for AY 2016–17, the accountant of the assessee inadvertently clubbed the figures of "balance with banks" and "cash-in-hand" under the single head "balance with banks", showing an aggregate amount of Rs. 35,41,037, instead of disclosing the two amounts separately. In this regard, my attention had been drawn to paper book page number 6. It was also submitted that since the assessee had not commenced any business activity, therefore, the said cash withdrawn by the assessee remained unutilized and continued to be available to the assessee.

In order to substantiate its arguments, the assessee has relied upon documents in the shape of aforesaid documents:

The assessee further submitted that at every stage it has reiterated to the Revenue authorities that no business activity had been undertaken during the year under consideration and the entire facts had already been narrated in the statement of facts in Form 35 as well, wherein it was specifically mentioned that while filing the return of income for AY 2016–17, the combined total of cash and bank was mentioned through oversight. Therefore, if the total of cash and bank balance as per the balance sheet is considered, then in that eventuality, the total of cash and bank reflected together is perfect and tallies.

It is not disputed that the assessee was maintaining books of accounts and all the documents relied on by the assessee in the shape of balance sheet and profit & loss account, cash book and bank book for AY 2017–18 and AY 2016–17, and the income tax returns have not been found faulted by the assessee. In other words, the books of accounts maintained by the assessee establish availability of the cash, and since no defect was pointed out by the AO in the books of accounts of the assessee, and even the books were not rejected under Section 145 of the Income Tax Act, therefore, considering the entire facts and also keeping in view the fact that Section 69A has no application to cash duly recorded in the books and where clerical mistake in the return cannot override contemporaneous books of accounts, and thus, after appreciating the facts of the entire case and considering the arguments, I find that the additions made in the present case are required to be deleted. Therefore, I direct the AO to delete the said additions.

Accordingly, the grounds raised by the assessee are allowed.

In the result, the appeal filed by the assessee stands allowed.