RAHUL AGGARWAL,INDIA vs. INCOME TAX OFFICER WARD 30(3), CIVIC CENTRE, DELHI

That on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in sustaining an addition of 26,47,700 under section 69A of the Act. The said addition represents cash payments towards credit card dues, which were fully explained as sourced from withdrawals from the Appellant's own bank account and from capital account drawings duly reflected in the books of account. The Ld. CIT(A) failed to appreciate that once the Appellant discharged the onus by furnishing bank statements, cash book, and capital account extracts, the addition could not be sustained in absence of any contrary material brought on record by the Assessing Officer.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to consider and properly appreciate the documentary evidence filed by the Appellant, including: (i) Kotak Mahindra Bank statements showing withdrawals; (ii) Cash book showing availability of cash; and (ii) Capital account reflecting drawings of 17,63,314/inclusive of the impugned payments. None of these evidences were found to be false or fabricated. The addition sustained is therefore based on surmises, in violation of settled principles that once primary evidences are produced and not disproved, the claim must be accepted.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the Appellant's explanation by observing that cash withdrawn in April 2016 could not logically have been retained till July 2016 for making credit card payments. Such inference based on "human probability is subjective and cannot override documentary evidence of withdrawals and cash availability. Judicial authorities including CIT vs. Kulwant Rai (291 1TR 36, Delhi HC), ITO vs. Mrs. 5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in Sustaining the addition on the basis of a self-prepared working of alleged "negative cash balances (para 7.9 of the order) without ever con fronting the Appellant with such working during the appellate proceedings. The Appellant was thus deprived of an opportunity to reconcile and explain the alleged deficit. It is well settled law, inter alia by the Supreme Court in Kishinchand Chellaram vs. CIT (125 ITR 713), that no material adverse to an assessee can be used without affording a reasonable opportunity of rebuttal. The impugned addition sustained in violation of this principle is bad in law and liable to be deleted.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in placing reliance on the decision of Mir Basheeruddin Ali Khan vs. ACIT (42 taxmann.com 69, ITAT Hyderabad), wherein the assessee was alleged to have held cash for over a year without explanation. The facts of the present case are materially different, as the cash withdrawals and repayments in question occurred within the same financial year, were duly recorded in the books, and were directly correlated with capital account drawings. Reliance on an inapposite precedent has led to an erroneous conclusion and vitiates the order.

That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the Appellant's own capital and disclosed funds as unexplained money under section 69A. The gifts from relatives credited in the capital account (as acknowledged in para 7.13 of the CIT(A)'s order) and withdrawals from the Appellant's bank account constitute legitimate, tax-paid, and exempt sources, duly disclosed in the return of income and financial statements. It is a settled proposition that the Income- tax Act does not prohibit an assessee from withdrawing his own funds in cash and utilizing them later at his discretion. In absence of any evidence of undisclosed income or assets, the impugned addition of 26,47,700/- is wholly unsustainable in law.

That the authorities below have erred in law in facts in construing and making wrong observations for the purpose of making addition U/S 69A of the Income Tax Act. The Appellant having produced the evidence of availability of funds and amount received as gift have not been considered and commented upon for the rejection of claim, therefore order his perverse and required to be set aside.

That the Appellant craves leave to add, alter, amend or withdraw any of the grounds at the time of hearing.”

Ld. Authorized Representative for appellant assessee submitted that Ld. CIT(A) failed to appreciate that detailed submissions along with supporting document with affidavit were submitted. Addition of Rs.12,70,331/- being payments Rahul Aggarwal vs. ITO towards credit bills dues were made by Ld. AO u/s 69 of the Act as unexplained income from undisclosed sources and added total return of income of Rs.4,80,280/- of the assessee and books as per section 115BBE of the Act. Ld. CIT(A) sustained partial addition of Rs.6,47,700/- made from cash in hand available to the assessee. Ld. Authorized Representative submitted that the assessee had paid his credit card bills by withdrawing the amounts from the cash in hand to the tune of Rs.6,47,700/- The part payments to the credit card agencies made through bank were to the tune of Rs.6,29,631/- which was accepted by the Ld. CIT(A). Cash book entries clearly show that assessee had withdrawn various amounts from the bank. Balance sheet of the assessee is at page No.87 of the PB as Annexure A. Copy of the Capital account of assessee at page No.88 and Profit and Loss account of assessee is at page No.89. The addition made by the Ld. AO may be set aside.

Ld. Departmental Representative relied on the order of the Ld. CIT(A).

From examination of record in light of aforesaid rival contention, it is crystal clear that case of assessee was selected for limited scrutiny regarding credit card payments. Ld. AO made addition of Rs.12,77,331/- as amount of payment made towards the credit card bill dues u/s 69 as unexplained income from undisclosed sources. Ld. CIT(A) accepted the credit card payments through the bank to the tune of Rs.6,29,631/- and sustained addition of Rs.6,47,700/-. Copy of the ledger account of Kotak Mahindra Bank as Annexure-D shown that payments of Rs.6,47,700/- made to credit card agency in cash was withdrawn by the assessee from sole Kotak Mahindra Bank. Copy of cash book is also being enclosed as Annexure-E. Copy of ledger account of Kotak Mahindra Bank in the books of books of assessee as Annexure-F. None of the above source and amounts mentioned in the statement of Rahul Aggarwal vs. ITO

1 Ld. CIT(A) rejected assessee’s explanation by observing that cash withdrawn in April 2016 could not logically have been retained ill July 2016 for making credit card payments. Such inference based on “human probability being subjective cannot override documentary evidence of withdrawals and cash availability.

In view of above material facts apparent on record, addition of Rs.12,77,331/- u/s 69A of the Act made by Ld. AO being unjust, unfair, unreasonable and illegal is set aside. Grounds of appeal are accepted.

In the result, the appeal filed by the assesse is allowed.