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Income Tax Appellate Tribunal, HYDERABAD BENCHES “SMC”, HYDERABAD
Before: SHRI K. NARASIMHA CHARY
ORDER Aggrieved by the order dated 21/03/2024 passed by the learned Commissioner of Income Tax (Appeals)- Na�onal Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Seven Energies Limited (“the assessee”) for the assessment year 2017-18, assessee preferred this appeal.
Assessee is engaged in the business of solar power. It filed its return of income for the assessment year 2017-18 on 6/11/2017 declaring a loss of Rs. 5, 76, 360/-. During scru�ny, learned Assessing Officer noted that there were cash deposits to the tune of Rs. 33.75 Lacs in the account of the assessee during the mone�za�on period. Assessee explained to the learned Assessing Officer that during the month of April/May, 2016 they withdrew certain amounts to the tune of Rs. 45 lacs, for the purpose of se�ling wages and other pe�y expenditure which remained payable due to li�ga�on at sites, and also due to ongoing nego�a�ons with the par�es. According to the assessee, in that pursuit some amount of cash remained with the assessee and due to demone�za�on they got back the cash and deposited into the bank.
According to the learned Assessing Officer there were deposits on 19/11/2016, 21/11/2016 and 24/11/2016 at the rate of Rs. 5 Lacs on each occasion and on 8/12/2016 there was a deposit of rupees18.75 Lacs, totaling Rs. 2 33.75 Lacs; whereas there were withdrawals of 5 Lacs each on 21/4/2016, 27/4/2016, 30/4/2016, 5/5/2016 and 7/5/2016, and Rs. 10 Lacs each on 4/5/2016 and 6/6/2016 totaling rupees 45 Lacs. Learned Assessing Officer stated that a sum of Rs. 5 lakhs withdrawn on 21/4/2016 was immediately transferred and therefore, such sum is not available to be shown as a source to the deposits made during the moderniza�on period. In respect of the balance amount that was withdrawn, learned Assessing Officer stated that these sums were withdrawn by one Narsimlu and Santhosh and there is no evidence on record to show that the same cash was available with the assessee �ll now my/December, 2016 to be deposited back into the bank. Learned Assessing Officer, accordingly, added the en�re cash deposits during the mone�za�on period to the tune of Rs. 33.75 Lacs to the income of the assessee.
Assessee preferred appeal before the Learned CIT(A) and pleaded the same, but the Learned CIT(A) also did not believe the version of the assessee that the earlier withdrawals are the source for the deposits holding that there is no proof for the same. Hence the assessee filed this appeal contending that the authori�es failed to consider the audited financial statements and the bank statements furnished by the assessee to appreciate his conten�on that there was no addi�onal income that remains unexplained. The cash deposits made in the months of November/December are purely out of the cash on hand, but not any addi�onal income.
Per contra, Learned DR argued that there was no reason for the assessee to accumulate the withdrawn amount without exhaus�ng the same and going for the next withdrawal, and the very fact that the assessee kept the funds idle in cash itself runs contrary to the ordinary course of human conduct, and therefore, the authori�es rightly rejected the conten�ons of the assessee and made and sustained the addi�ons.
I have gone through the record in the light of the submissions made on either side. There is no dispute of the fact that there were some transfers of funds by the Directors and withdrawals from bank by the assessee between 21/4/2016 and 7/5/2016 totaling to Rs. 45 Lacs, which according to the assessee were withdrawn for the purpose of se�ling the various and other pe�y expenses which remains unpaid due to some ongoing li�ga�on and nego�a�ons, such funds were available in cash with the assessee and due to the sudden demone�za�on, the unspent amounts were deposited bank into the account of the assessee. It is only on suspicion the authori�es held that the assessee, being a business concern, will not keep the fund is idle without u�lisa�on and the withdrawals about 6 months prior to the demone�za�on, will not cons�tute an acceptable source to explain the deposits during the demone�za�on period. 7. Through a catena of decisions, the judicial of opinion is that no addi�on could be made under sec�on 68 of the Act on the sole reason that there is a �me gap between the date of withdrawal from bank account and redeposit the same into the bank, unless the learned Assessing Officer demonstrates that the amount in ques�on was used by the assessee for any other purpose. Gordhan vs ITO in and ACIT vs. Baldev Raj Charla 121 TTJ 366 (Delhi) are to cite a few. Even if we accept the conten�on of the learned Assessing Officer that out of the total withdrawal of rupees for�fy Lacs, the Rs. 5 Lacs withdrawn on 21/4/2016 was not available to the assessee to make a deposit during the mone�za�on period, s�ll the balance of Rs. 40 Lacs is sufficient to account for the deposits of Rs. 33.75 Lacs. Spending or otherwise of the withdrawn