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Income Tax Appellate Tribunal, ‘B’ BENCH, BENGALURU
Before: SHRI J. SUDHAKAR REDDY & SMT. BEENA PILLAI
O R D E R
Per J. SUDHAKAR REDDY, AM:
This is an appeal by the assessee directed against the order of the CIT(A)-5, Bengaluru, dated 31/3/2016 for the assessment year 2010-11.
The assessee is an individual and is in the business of production of films and distribution of films for Telecasting and filed his return of income electronically for the assessment year 2010-11 on 25/9/2010 declaring taxable income of Rs.39,02,670/-. The Assessing Officer completed assessment u/s 143(3) of the Income- tax Act,1961 ['the Act' for short] determining the total income at Rs.74,82,457/- inter alia making addition on account of deficit cash balance of Rs.22,42,688/- and disallowance u/s 40A(3) of Rs.10 lakhs.
Page 2 of 3 3. On appeal, the first appellate authority deleted the disallowance u/s 40A(3) but has confirmed the addition made on account of deficit cash balance of Rs.22,42,688/-. Aggrieved, the assessee is in appeal before us.
After hearing rival contentions, we find that the Assessing Officer made addition on account of deficit cash balance on 15/1/2010, as the assessee has not responded to show cause letter dated 12/2/2013. It was ex-parte order. Before the ld. CIT(A), the assessee pleaded that the entire expenditure incurred by it on movie ‘Gandedhe’ was wrongly accounted for on a single day and the fact was that the expenditure was incurred over a period of time and hence there was no cash deficit as alleged by the Assessing Officer. The ld. CIT(A), called for a remand report. The ld. CIT(A), at para.7, recorded as follows:
On examination of the vouchers it was found that the entire expenses were incurred in cash and vouchers did not bear any number which were self-made and not supported by any bills. Thus, the Assessing Officer observed that there is not consistency in the payments/ expenses in the cash book and that the maintenance of cash book is not in accordance with the fundamental principles of accounts. Further the reasons given by the assessee for deficit cash balance therefore not acceptable because the assessee’s case is covered u/s 44AB of the Income tax Act, 1961 therefore submitted to confirm the addition made by the Assessing Officer.
(emphasis supplied) When the Assessing Officer states in the remand report that maintenance of cash books is not in accordance with fundamental principles of accounting and also that the vouchers did not bear any number and are self-serving etc., the deficit in such incorrect cash book cannot be basis of making the addition. No addition can be made, based on an incorrect and wrong cash-book. Deficit cash
Page 3 of 3 balance can be ascertained only when the cash book is correct. Hence, we delete the addition of Rs.22,42,688/-.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 17th July, 2019.