Loading judgment…
Facts
The assessee company, engaged in steel trading, declared income for the year. Its case was selected for scrutiny to verify a cash deposit of Rs. 64,21,000/- made during the demonetization period. The assessee claimed the source was prior withdrawals, but the AO doubted the transaction's correctness.
Held
The Tribunal held that while the department had no evidence of undisclosed cash introduction, the assessee's explanation for cash withdrawals during the demonetization period was not satisfactory. The disallowance was restricted to the difference between cash deposited and the reduction in cash expenses.
Key Issues
Whether the cash deposited during the demonetization period, claimed to be from prior withdrawals, constitutes unexplained money, and if so, to what extent should the addition be sustained.
Sections Cited
143(2), 142(1), 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI OMKARESHWAR CHIDARA
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 13/05/2025 passed by NFAC, Delhi for assessment year 2017-18 on following grounds of appeal :
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition of 64,21,000 made u/s. 69A representing the cash deposited in the bank account during the demonetisation period.”
2. The assessee is company engaged in trading in steel items such as TMT bars etc. For the year under consideration the assessee declared income from business as well as income from other sources and filed its return of income by declaring total income of Rs. 48,36,153/- on 28/10/2017. The case was selected for scrutiny and notice u/s.143(2) along with notice 142(1) was issued to the assessee. 2.1 One of the reason for selecting the case under scrutiny was to verify source of cash of Rs. 64,21,000/- deposited by the assessee during demonetisation period between 08/11/2016 to 31/12/2016 in Abhyudaya Bank account. The Ld.AO called upon assessee to furnish details in respect of the source of cash deposited, cash book for the year under consideration, as well as previous financial year, copies of bank accounts held with different banks etc., In response, the assessee filed its submissions while letter dated 12/09/2019 and 24/09/2019. The assessee claimed that the source of cash deposited during demonetization period was from withdrawals made from the bank in preceding months. The assessee submitted chart giving information regarding opening cash balance, cash sales, cash withdrawals made, and the closing balance of the cash for financial years 2015-16 and 2016-17 on monthly basis. 2.2 The Ld.AO after considering the submissions of the assessee observed that, as compared to the previous years assessee has considerable reduction in cash expense from 01/04/2016 to 31/11/2016. However the withdrawals from the bank increased. The Ld.AO thus, doubted the correctness of the accounts of the A.Y. 2017-18 A. Navinchandra Steel Private Limited assessee to the extent of the cash transaction and was of the opinion that assessee introduced unaccounted money in books by suppressing/ differing cash expenses in cash book through manipulation for pre demonetization period. The Ld.AO thus made addition of the cash deposit of Rs.64,21,000/- made during demonetization period as unexplained money, by evoking provisions of section 69A of the Act. Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A).
The Ld.CIT(A) upheld the observations of the Ld.AO as no evidences were produced by the assessee to link the cash withdrawals with cash deposits.
Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal.
The Ld.AR submitted that, assessee do not deny the fact that cash expenses during the year under consideration reduced as compared to the earlier years. He placed reliance on the monthly cash summary for immediately preceding assessment year as well as year under consideration, to submit that the cash deposited was form the withdrawals made by the assessee. He further submitted that, assessment year 2016-17 was reopened and that the returns filed by the assessee were accepted by the Ld.AO. He submitted that the cash book and the bank statement clearly reveals the source of cash deposited is out of withdrawal and thus the assessee discharged its onus to establish source of cash deposited during the demonetization period.
A.Y. 2017-18 A. Navinchandra Steel Private Limited 4.1 The Ld.AR further submitted that, the cash deposits during the year under consideration have been duly recorded by the assessee in its books of accounts and has offered explanation in respect of the source of such cash deposited. He submitted that, under such circumstances if the Ld.AO was not satisfied with explanation offered by the assessee, he could have carried further verification in order to bring on record evidences contrary to assessee submission. The Ld.AR submitted that, the assessing officer never rejected the books of accounts of the assessee and accepted the cash deposit of Rs. 5,00,000/- made in the month of May, 2016 out of the cash withdrawals. 4.2 The Ld.AR submitted that, the authorities doubted only cash deposited during the demonetization and the assessing officer adopted selective approach without there being any contrary evidences to support the view taken by him. 4.3 The Ld.AR placed on recorded bank statements of Abhyudaya Cooperative Bank Ltd., for financial year relevant to assessment year under consideration. It is submitted that, the balance as on 31/03/2017 is Rs. 22,72,61,235/-. The Ld.AR submitted that, the cash withdrawal during the year has not been doubted by the assessing officer and therefore without there being contrary evidence assessee the submission of assessee that the cash deposited during the demonetization is out of such cash withdrawn cannot be rejected. 4.4 On the contrary, the Ld.DR submitted that, there is no explanation offered by the assessee as to why sum of Rs. 16,11,250/- was withdrawn in the month of October when assessee already had cash of Rs. 51,23,828/- as opening balance A.Y. 2017-18 A. Navinchandra Steel Private Limited for the month of October. The Ld.DR emphasised that the assessee is not able to satisfactorily explain as to why the said amount was withdrawan during October. 4.5 This Tribunal accordingly directed the assessee to furnish reconciliation of the cash utilised during the year under consideration vis a vis the immediately preceding assessment year. The assessee furnished following reconciliation statement and submitted that, the assessee should be allowed proportionate cash expenses and disallowance could be sustained only to the extent of difference being 17,33,484/- We have perused the submissions advance by both sides in the light of record placed before us.
Admittedly, there is no evidence with the department that assessee introduced undisclosed cash into the books of account. It is also fact that the assessing officer did not carry out any verification during the assessment proceedings to verify the utilization of the cash withdrawal or to compare the cash withdrawn and utilised in the preceding year vis a vis the year under consideration. 5.1 Be that as it may, it is also difficult to accept the submissions of the assessee that cash withdrawn during the year was deposited during the demonetization period. Admittedly, the assessee is unable to explain why cash of Rs. 16,11,250/- was A.Y. 2017-18 A. Navinchandra Steel Private Limited withdrawn in the month of October when it already had sufficient cash as opening balance for that month. The assessee originally in the paper book filed rough cash summary, however on requirement by the bench, reconciliation statement was furnished by the Ld.AR subsequent to the hearing. There is no satisfactory explanation provided for the withdrawal made during the month of October, even though assessee had sufficient opening cash in hand. It is noted that as per the reconciliation filed along with submission, there is a difference of Rs. 17,53,484/-. 5.2 We therefore agree with the alternate plea of the Ld.AR that, the disallowance is to be restricted to Rs. 17,53,484/- being difference between the cash deposited during year less the reduction in total cash expenses during the year. Accordingly the grounds raised by the assessee stand partly allowed. In the result the appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 22/08/2025