RAJESH BENARA,KANPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, KANPUR
Facts
For Assessment Year 2010-11, the Assessing Officer made an addition of Rs.1,19,462/- for unexplained cash under section 143(3), which was subsequently dismissed by the CIT(A) upon appeal. The assessee appealed to the ITAT, arguing that the amount represented an opening balance from the preceding year, supported by family income and prior income tax returns.
Held
The ITAT held that the opening cash balance was adequately explained by disclosed income of the assessee and family members from earlier years. It ruled that any doubt regarding the opening balance from a preceding financial year should lead to an adverse reference in that preceding assessment year, not the current one. Consequently, the addition of Rs.1,19,462/- was deleted.
Key Issues
Whether an addition for unexplained cash, originating from an opening balance from a preceding year, can be sustained in the current assessment year.
Sections Cited
Section 143(3) of the Income Tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
PER ANADEE NATH MISSHRA:A.M.
(A) This appeal vide I.T.A. No.128/Lkw/2024 has been filed by the assessee pertaining to assessment year 2017-18 against impugned appellate order dated 15/02/2024 [Din & Order No.ITBA/NFAC/S/250/2023- 24/1060980945(1)] passed by learned Commissioner of Income Tax (Appeals) [“CIT(A)” for short].
(B) The facts of the case, in brief, are that the assessee filed his return of income on 10/12/2010 declaring total income of Rs.3,57,490/-. The Assessing Officer completed the assessment and passed assessment order on 08/03/2013 u/s 143(3) of the Income Tax Act, 1961 (“the Act” for short)
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determining the total income of the assessee at Rs.4,76,950/- by making addition of Rs.1,19,462/- on account of unexplained cash. Being aggrieved, the assessee filed appeal against the assessment order in the office of learned CIT(A). Vide order dated 27/01/2023, the assessee’s appeal was dismissed by the learned CIT(A). Being aggrieved, the assessee has filed the present appeal in Income Tax Appellate Tribunal against the aforesaid impugned appellate order of learned CIT(A).
(C) In the course of appellate proceedings in ITAT, there was no representation from the assessee’s side. However, a written submissions was filed by Shri Ashish Jaiswal, Advocate vide which it has been submitted that the family members of the assessee had filed their income tax returns i.e. Sangeeta Jain, wife at total income of Rs.11,60,990/- and Pratham, sone at total income of Rs.2,05,190/- apart from assessee’s own ITR at Rs.3,57,490/- after deduction under chapter VIA and assessee has made withdrawals for house hold expenses, as appearing in cash flow statement and cash book. It has also been argued through the above written submissions that the opening balance is coming from the preceding year and no addition can be made in the present assessment year out of the balance from preceding year. Learned D.R. supported the orders of the Assessing Officer and the learned CIT(A).
(D) We have heard both parties and have gone through the material placed on record. The written submissions filed from the assessee’s side are reproduced below:
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(D.1) A paper book containing the following particulars was also filed from the assessee’ side:
(D.2) The opening cash balance is supported by income disclosed by the assessee in earlier years. Further, the assessee’s family members have also disclosed income. Based on these supporting materials, the assessee’s contention that the opening balance is explained, is on sound footing. Revenue has not made any case for addition of the aforesaid amount of Rs.1,19,462/- on account of opening balance. The Assessing Officer has failed to appreciate that it is not a requirement of law, that a taxpayer should have nil opening balance. The relevant issue is whether, in the facts and circumstances of the case, considering the income of the ase in earlier year(s) and considering various other sources of funds in earlier year(s) the opening balance claimed by the assessee is credible or not. Revenue has failed to prove that the aforesaid amount of Rs.1,19,462/- was not out of disclosed income and other sources of funds in earlier year(s). Even assuming, for the sake of discussion that the opening balance is not explained by income and other sources of funds in earlier years; even then accounting principles and provisions of law do not permit the addition in this year. Opening balance as on 01/04/2009 in this case, is nothing but (and same as) closing balance as on 31/03/2009. Therefore, if closing balance
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as on 31/03/2009 on last day of preceding financial year (i.e. opening balance as on the first day of current financial year) is doubted, adverse reference, if any, is to be taken in preceding financial year(s) and not in the current financial year. In view of the foregoing, the addition of Rs.1,19,462/- is hereby deleted.
(E) In the result, the appeal of the assessee is allowed.
(Order pronounced in the open court on 20/01/2026)
Sd/. Sd/. (KUL BHARAT) (ANADEE NATH MISSHRA) Vice President Accountant Member
Dated:20/01/2026 *Singh
Copy of the order forwarded to :
The Appellant 2. The Respondent 3. Concerned CIT 4. D.R. ITAT
