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Facts
During the demonetization period, the assessee made cash deposits of Rs. 1,03,51,500/-. Rs. 30,00,000/- was attributed to an imprest account, which was challenged by the authorities, and Rs. 8,27,000/- was an unsecured loan, also added back by the authorities. The explanation for cash sales was accepted by the AO, but the imprest explanation was rejected.
Held
The Tribunal deleted the addition related to the imprest account, finding it was duly recorded in the books and its quantum was a business decision. The Tribunal also deleted the addition for unsecured loans, as the assessee successfully proved the identity, creditworthiness, and genuineness of the creditors and transactions, which were also recorded in the books of account.
Key Issues
Whether the additions made on account of cash deposits from an imprest account and unsecured loans were sustainable under the Income Tax Act, considering the assessee's explanations and documentation.
Sections Cited
143(3), 69A, 100BBE, 68
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Income Tax Appellate Tribunal, DELHI BENCH “SMC”: NEW DELHI
O R D E R
PER Ms. MADHUMITA ROY, JM:
The instant appeal, filed by the assessee, is directed against the order dated 05.07.2024 passed by the learned Commissioner of Income-tax (Appeals)/ National Faceless Appeal Centre (NFAC), Delhi, arising out of the order dated 19.12.2019 passed by the Income-tax Officer, Ward 2(5), Gurgaon, under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), for assessment year 2017-18
Facts leading to the instant appeal are that the assessee made cash deposits of Rs. 1,03,51,500/- in her bank account maintained with PNB and Canara Bank respectively during demonetization period. The source thereof was directed to be that Rs. 30,00,000/- was deposited from the imprest account shown in the balance- sheet under the head ‘loan & advances’ and balance 73,51,500/- was deposited from business operation. Details of imprest was duly filed before the learned AO as is evident from page 2 of the order passed. The explanation in regard to cash sales was accepted. The explanation in regard to imprest was rejected in the absence of any concrete evidence filed by the assessee. Further that the financials for the period commencing from 1.4.2015 to 31.3.2016 were not uploaded on the ITBA portal. In appeal the addition of Rs. 30,00,000/- was upheld only on the ground that there was no justification in holding so high amount in imprest.
The case of the assessee before us is that questioning of holding high amount in imprest is beyond jurisdiction of the first appellate authority, rather it is the assessee to decide in view of business expediencies how much imprest the assessee should maintain. It also comes from record, particularly audited financials that the imprest was appearing and the details of such account was also submitted before the authorities below. Furthermore, the financials having been audited and submitted to the income-tax authorities much before demonetization; the question of manipulation as raised by the authorities below is, therefore, to be ruled out.
Upon perusal of the order I find that the authorities below have not been able to bring any proof that the imprest available with the assessee has been used particular aspect of the matter, when the imprest is appearing in the books of account, the addition by invoking section 69A and 100BBE is held as bad in law and is therefore deleted.
The issue in regard to addition of unsecured loan of Rs. 8,27,000/- is also under challenge before us in respect of which the accounts of loan creditors and confirmation from the loan creditors were duly explained before the authorities below. Neither any inquiry was further made by the AO in issuing notice to the loan creditors to get any further requisite document directly. It further appears that here was sufficient balance with the loan creditors which has not been doubted nor mentioned in the remand report as directed to be submitted by the learned CIT(A) on the basis of the evidence adduced by the assessee before him. Upon perusal of the statement of the loan creditors when large amount was appearing in the opening balance out of which the payments were made to the assessee and the loan creditors confirmed the loan and produced the bank statement and income tax return upon summons being issued by them in the remand proceedings, the addition is not sustainable as the case made out by the assessee is found to be acceptable. It is further relevant to mention that the loan creditor has a running account and the outstanding loan of the party as on 31.3.2016 was Rs. 31,12,500/-.
The assessee what-ever amount received repaid the same as appears from the documents placed before us. Thus, having regard to the entire aspect of the matter when the creditors have been able to prove their identity, creditworthiness and genuineness of such transactions and particularly when the loan was appearing in the books of account of the assessee the addition made u/s 68 and 100 BBE of the Act is found to be not sustainable and is deleted.
In the result, assessee’s instant appeal is allowed.
Order pronounced in open court on 21.03.2025.