DECCAN CONSTRUCTION CO. ,MADURAI vs. ACOT. MCC-2,, MADURAI

The effective ground of appeal in this appeal of assessee is against confirming the cash deposits during demonetization period to the extent of Rs. 13,61,653/- u/s. 68 of the Act.

The assessee is a civil contractor and filed return of income showing total income of Rs.45,17,630/-. During demonetization period, the assessee had made cash deposits amounting to Rs.26,00,000/-.

The assessee had explained the source of cash deposits as cash withdrawals from bank account in the preceding one and a half month, and retained for emergency purposes. However, the A.O did not accept the assessee’s explanation of cash balance available before demonetization period of Rs.32,00,000/- as the assessee already had sufficient cash balance and there was no need to withdraw from the bank and retain it. The A.O computed the average cash withdrawal from April, 2016 to October, 2016, which was of Rs. 18,38,347/- and accepted only Rs. 18,38,347/- as explained and treated the balance of Rs.13,61,653/- (i.e., Rs.32,00,000-18,38,347/-) as unexplained cash credits u/s. 68 of the Act. On appeal, the Ld. CIT(A) upheld the addition made by the A.O.

The Ld. Authorized Representative (A.R) of the assessee has submitted that the source of cash deposit of Rs.26,00,000/- made during demonetization period were out of withdrawal from TMB OD A/c. No.431765 which is evident from the bank statement . The Ld AR submitted that Rs.32,00,000/- has been withdrawn from the bank which is duly recorded in the cash book and the cash deposit of SBNs were out of these withdrawals. However, the A.O and the Ld. CIT(A) had only considered the average withdrawal from April to October, 2016 to consider the source of cash deposit, which is arbitrary and has no basis to make the addition.

On the other hand, the Ld. Departmental Representative (DR), has relied on the orders of lower authorities.

We have heard the rival submissions, and perused the materials available on record. It is evident from the back account that the assessee has withdrawn cash of Rs. 30,00,000/- from TMB OD a/c.

No.431765, and these transactions are duly recorded in the cash book. Further, as per the cash book, cash balance available as on 07.11.2016 was of Rs. 27,73,186/-. Therefore, the source of cash deposit stands duly explained. The A.O has arbitrarily considered the average cash balance instead of the actual cash balance available as on 07.11.2016. Since, the cash withdrawal were made from the bank and properly accounted for, the A.O was not justified in making the addition. Accordingly, the order of Ld CIT(A) is set aside and addition made by the A.O is deleted.

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