NAM TECHNOLOGIES PRIVATE LIMITED ,MUMBAI vs. ACIT 14(2)(2), MUMBAI

Aggrieved the assessee was in appeal before the first appellate authority, who vide order dated 04.03.2025, upheld the addition made by the ld. AO on the ground that the assessee had failed to substantiate the source of cash deposits made in its bank account during the demonetization period.

The assessee is in appeal before us, challenging the impugned addition.

The learned Authorised Representative ('ld. AR' for short) for the assessee contended that in the second round of appeal before the ld. CIT(A), the assessee had furnished all the details pertaining to the transactions along with the cash book for F.Y. 2015-16 and (A.Y. 2017-18) NAM Technologies Pvt. Ltd. F.Y. 2016-17 and the bank statement of the three banks in which the cash was deposited. Further, the ld. AR stated that the audited balance sheet for previous year and the relevant assessment year was also furnished along with month wise cash deposits and withdrawals for F.Y. 2015-16 and 2016-17. The ld. AR further contended that the assessee’s nature of business involved handling cash and the bank statements reflected regular withdrawals and deposits in the regular course of business. The ld. AR submitted that all these details were furnished during the appellate proceeding and the same was not considered by the ld. CIT(A). The ld. AR relied on the following decisions of the Tribunal, where on identical facts, the additions were deleted in the hands of the assessee. a. Smt. Krishna Agarwal vs. ITO, dated 07.09.2021, b. Ajit Bapu Satam vs. Deputy Commissioner of Income Tax, [2023] 147 taxmann.com 222 (Mumbai – Trib.). c. Sudhirbhau Pravinkant Thaker vs. ITO, Ward-5(1), Ahmedabad, [2017] 88 taxmann.com 382 (Ahmedabad – Trib.) 7. The learned Departmental Representative ('ld. DR' for short) for the revenue on the other hand controverted the said fact and stated that the assessee’s nature of business is not cash incentive and that assessee has failed to prove by cogent evidence that the cash deposits were from the earlier income, savings or withdrawals which were maintained in the regular course of business. The ld. DR also pointed out that there was significant cash deposit just before demonetization was declared raising a suspicion that the assessee anticipated the demonetization notification. The ld. DR relied on the order of the lower authorities.

Having heard the rival submissions and perused the materials available on record. The only issue that requires adjudication is whether the assessee has explained the nature and source of the cash deposits made by it during demonetization period. On verification of the documentary evidence furnished by the assessee, it is observed that the opening balance in the cash account book for F.Y. 2015-16 was Rs. 14,204/- and the closing balance was Rs. 22,04,204/- and that the opening balance in the cash account book on 01.04.2016 i.e., much prior to the demonetization period was Rs. 1,21,42,398/- and the closing balance was Rs. 1,28,03,192/-. On perusal of the bank statements for earlier years and before the demonetization period, it is noticed that there have been several withdrawals. Pertinently, the audit balance sheet as on 30.08.2016, reflected cash and cash equivalent amount to Rs. 1,39,44,476/-. Further, in the audit balance sheet for the relevant assessment year, the assessee has disclosed that it had Specified Bank Notes (SBNs) amounting to Rs. 1,34,73,500/- and others amounting to Rs. 34,61,993/- which establishes the fact that the assessee’s nature and source of the cash deposit was out of its regular course of business. It is observed that the ld. CIT(A) had earlier dismissed the appeal of the assessee ex parte and the assessee was in appeal before the Tribunal, where the same was remanded back to the ld. CIT(A) for adjudication and in the second round of appeal, the assessee is said to have furnished all the documentary evidences which are before us. The ld. CIT(A) in his order has not discussed the financials of the assessee and has also failed to establish that the details furnished by the assessee are not reliable. This according to us, is not justifiable as the ld. CIT(A) ought to have discussed in detail with regard to the documentary evidences furnished (A.Y. 2017-18) NAM Technologies Pvt. Ltd. by the assessee. In our view, the assessee is said to have discharged its primary onus casted upon it to establish the source of the deposits made by it during the demonetization period. On consideration of the provisions of Section 69A of the Act which explains that when the assessee has not recorded in the books of accounts any money, bullion, jewellery or other valuable articles, the nature and source of which is not explained or when the explanation offered by the assessee is not to the satisfaction of the ld. AO, then, it is deemed to be the unexplained money of the assessee. In the present case in hand, the assessee has given sufficient explanation along with documentary evidences to explain the nature and source of the cash deposit made in its bank account which the ld. CIT(A) has not faulted with expressly. In the absence of any such finding, we deem it fit to hold that the assessee has discharged its onus by corroborative evidence and the revenue has failed to contradict the same. The case laws relied upon by the ld. AR also supports the assessee’s contentions.

From the above observation, we deem it fit to allow ground no. 3 raised by the assessee and direct the ld. AO to delete the impugned addition. As there was no argument on the legal ground raised