SAMIR NAVINCHANDRA SHAH,PALDI, AHMEDABAD vs. INCOME TAX OFFICER, WARD 5(3)(2), AAYAKAR BHAVAN, VEJALPUR

The Ld. CIT(A) confirmed the order of the AO.

We have heard both the parties. The contention of the Ld. Counsel for the assessee before us was that the assessee had discharged its onus of proving the source of cash deposited in the Bank from cash sales and cash withdrawals made by it from Bank. That the assessee had supported its explanation of the source of the cash deposited by submitting the entire copy of its cash book, bank book, sales ledger, ledger account of all parties to whom sales were made in cash, and submitting its audited financial statements. His contention was that no infirmity was found in any of the documents submitted by the assessee nor were the books of accounts rejected. His case was that the authorities below had rejected assessee’s explanation for baseless and irrelevant reasons. The Revenue, on the other hand, has relied on the findings of the Ld. CIT(A)/AO.

On considering the arguments of both the sides and ongoing through the orders of the authorities below, we find merit in the contention of the Ld. Counsel for the assessee.

The cash deposited in the bank of the assessee amounting to Rs.32,90,000/- during demonetization period pertained to cash deposit in three bank accounts of the assessee as under: i. Sarangpur Bank Account No. 78 Rs.10,90,000 ii. Sarangpur Bank Account No. 37 Rs.15,000,000 iii. Bank of Baroda Account No. 27370200000265 Rs.7,00,000/- Rs.32,90,000/- Total

Undisputedly and admittedly, the assessee had explained the source of the cash deposited as being out of cash sales made Navinchandra Shah vs. ITO] A.Y. 2017-18 - 4 – by it and cash withdrawn from its bank account and in support of his explanation had submitted;

Admittedly, no anomaly has been found in the above documents submitted by the assessee and nor have the books of accounts of the assessee been rejected.

The orders of the authorities below reveal that the assessee’s explanation of the source of cash deposits from cash withdrawals has been rejected noting from the books of accounts of the assessee that while the assessee had made huge withdrawals of Rs.28,20,000/- during the period 01.04.2016 to 31.10.2016, he had failed to provide a cogent explanation of the business purpose for making such substantial withdrawals. It has been noted by the Revenue that the assessee’s cash expenditure incurred monthly on an average was to the tune of Rs.5,51,593/- and, therefore, it was found strange that the assessee had made periodic withdrawals from the bank account amounting to Rs.28,20,000/- during the period from 01.04.2016 to 31.10.2016 maintaining it as cash in hand without spending it for business purposes.

Ld. CIT(A), we have noted, has rejected the assessee’s explanation attributing the cash deposit in the bank to cash sales made, finding that the assessee had not established the genuineness of the cash sales by furnishing any details of the customers to whom the sales were made and further, noting that no TDS was deducted on the bills raised to these parties.

The assessee before us has submitted the ledger account of all such parties to whom cash sales were made, which was submitted during the assessment proceedings and he has pointed out that they contain the complete address of the parties also. Therefore, the finding of the Ld. CIT(A) that the assessee did not furnish details of parties to whom cash sales were made, we hold, is incorrect.

Even otherwise, we find that once the assessee submitted all sales ledgers of cash sales and his cash book, bank book and even audited financial statement, no further questions were asked from the assessee. The assessee was never asked to confirm the cash sales made by it. Further, the fact that no TDS was deducted on this cash sales maybe an infringement of law, but, that alone does not cast any doubt on the genuineness of transaction of cash sales made by the assessee.

The Ld. CIT(A), we have noted, has further found discrepancy in the opening balance of cash reflected in the books of the assessee and in the income tax return filed by the assessee. The assessee has submitted to us that firstly, this aspect was never confronted to the assessee and if confronted the assessee would have submitted re-conciliation of the figures of cash balance as per the financial statement of the assessee and that reflected in its ITR. He contended that the figures reflected in the ITR was accumulation of several accounts and does not reflect the cash balance alone.

Finding the Ld. CIT(A) to have picked up this aspect of discrepancy in the cash balance reflected in the balance sheet of the assessee and that reflected in its ITR, at the back of the assessee and the assessee having given a plausible explanation of the same before us, we reject this basis of the Ld. CIT(A) also for rejecting the assessee’s explanation of source of cash deposited in his bank account.

As for the basis with the AO for rejecting assessee’s explanation, we find that the Ld. CIT(A) found no merit in the same having found his own basis for rejecting assesses explanation, which have all been delat with by us above.

The AO had further noted the discrepancy in the opening cash balance for the past three years i.e. 01.04.2016, 01.04.2015 & 01.04.2016 as compared to the cash balance as on the date of demonetization i.e. 08.11.2016. He found the cash balance as on the date of demonetization to be substantially higher as compared to the opening cash balance in the past. To this, the assessee had explained that the huge cash balance on the date of demonetization was on account of the fact that the assessee was required to deposit all specified bank notes in the bank on account of the demonetization exercised carried out by the Government of India.

The Ld. CIT(A), we find, has not passed his order, based on any of the above discrepancies noted by the AO.The Ld. CIT(A) has accepted the assessee’s explanation vis-à-vis these discrepancies.

In the light of the above, we hold that the assessee had discharged its onus of proving the source of cash deposit in his bank account amounting to Rs.32,90,000/- during demonetization period and the Revenue has given no cogent reason for rejecting the same and, therefore, there is no reason for treating the cash so deposited as from unexplained sources.The addition, therefore, made to the income of the assessee amounting to Rs.32,90,000/-u/s 69A of the Act is not tenable and is directed to be deleted.

Grounds of appeal are accordingly allowed.

In the result, the appeal of the asessee is allowed.