SAI SUMANTH MITTA,WARANGAL vs. INCOME TAX OFFICER, WARD-2, WARANGAL

Before the Ld. CIT(A), the assessee submitted that, although the A.O. has made an addition of Rs. 16,60,000/- towards cash deposits into the bank account during the demonetization period, but fact remains that the assessee has declared a sum of Rs. 8,00,000/- under the Income Declaration Scheme and paid taxes thereon. Therefore, the remaining disputed amount of cash deposits during the demonetization period was only Rs. 8,60,000/-. The assessee has furnished relevant details, including books of account to prove the availability of cash balance as on 08.11.2016 in demonetized currency. The Ld. CIT(A), without considering the relevant submissions, simply 4 Sai Sumanth Mitta sustained the additions made by the A.O. Therefore, it was submitted that the addition made by the A.O. should be deleted. The Ld. CIT(A), after considering the submissions of the assessee and also taking note of the amount of cash deposits during the demonetization period, observed that, the assessee could not satisfactorily explain the source of cash deposits, going by the amount of cash deposits during the demonetization period and the explanation of the assessee with regard to source. Although the assessee was not permitted to receive old currency against sales / realization of debtors during the demonetization period, but the assessee has accepted the demonetized currency, contrary to the notification issued by the Government of India and the Reserve Bank of India. Therefore, it was held that, the reasons given by the A.O. to make additions towards cash deposits into the bank account during the demonetization period are in accordance with law, and thus, sustained the additions made by the A.O.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee Shri A.V. Raghuram, Advocate, submitted that, the Ld. CIT(A) erred in sustaining the addition of Rs. 8,60,000/- towards cash deposits, even though the assessee was having sufficient cash balance as on 08.11.2016, which was the source for the cash deposits into the bank account. The learned counsel for the assessee further, referring to various evidences, including the relevant cash book, submitted that, the assessee is engaged in the business of distribution of FMCG products, and the total sales of the assessee are in cash. The assessee has further furnished relevant evidence and stated that, the cash collected out of the sale of goods has been recorded in the books of account and was available as on 08.11.2016. Although these evidences were filed by the assessee, but the Ld. CIT(A) sustained the addition made by the A.O. only on the ground that, the assessee could not explain how there was a sudden increase in cash balance from the month of September 2016 onwards, even though the books of account are self-explanatory and clearly show the availability of cash in hand. Therefore, he submitted that the addition made by the A.O. should be deleted.

The learned senior counsel for the Revenue, Shri A. Suresh, on the other hand, supporting the order of the Ld. CIT(A) submitted that, there was a sudden increase in cash sales and cash balance in the books of account of the assessee when compared to the earlier period. The assessee could not explain the reasons for the sudden increase in cash balance and cash sales. The A.O., after considering the relevant facts, has rightly held that, the assessee could not satisfactorily explain the availability of cash balance with corresponding evidence. The Ld. CIT(A) after examining the relevant facts, has rightly sustained the additions made by the A.O. Therefore, he submitted that, the addition made by the A.O. should be deleted.

We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has made cash deposits of Rs. 16,60,000/- in old currency (SBNs) during the demonetization period in his Andhra Bank account. The assessee has explained the source out of cash balance available as on 08.11.2016 as per the books of account 7 Sai Sumanth Mitta maintained for the relevant assessment year and also stated that the cash balance available as on 08.11.2016 was out of sales of goods and realization from debtors. The assessee further explained that out of Rs. 16,60,000/-, a sum of Rs. 8,00,000/- has been declared under the PMGKY Scheme as part of unexplained money / cash deposits during the demonetization period. The remaining amount of cash deposit was only Rs. 8,60,000/-, which needs to be explained by the assessee. The assessee furnished the relevant cash book extract for the period from 01.04. 2016 to 31.03.2017, and as per the cash book furnished by the assessee, cash balance as on 08.11.2016 was at Rs. 17,39,737/-, whereas the total cash deposits during the demonetization period, as observed by the A.O. himself, was at Rs. 16,60,000/-. The entire amount of cash deposit was out of the opening cash balance available with the assessee before the date of demonetization, in our considered view, the reasons given by the A.O. to make additions towards cash deposits as unexplained money under Section 69 of the Act is contrary to the evidence available on record and thus, cannot be sustained. The Ld. CIT(A), without appreciating the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside 8 Sai Sumanth Mitta the order of the Ld. CIT(A) and direct the A.O. to delete the addition of Rs. 8,60,000/- made towards cash deposits during the demonetization period.

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