PREM CONSTRUCTIONS,KANGRA (HP) vs. INCOME TAX OFFICER, WARD-DHARAMSHALA, DHARAMSHALA

relates to sustenance of addition of Rs. 9,55,000/- on account of unexplained cash deposited in the bank account maintained by the Assessee by invoking provision of Section 69A of the Income Tax Act, 1961.

The submissions so filed by the assessee were considered but not found acceptable to the AO. As per the AO, the assessee has maintained two bank accounts with Canara Bank, Kangra and Canara Bank Gaggal wherein there were deposits of Rs. 3,35,000/- and Rs. 6,20,000/- respectively totaling to Rs. 9,55,000/-. It was further held by the AO that no source of cash deposit has been furnished / explained by the assessee, accordingly the amount of Rs. 9,55,000/- was brought to tax as deemed income invoking the provision of Section 69A of the Act.

Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) and necessary submissions were filed to the effect that sufficient amount of cash has been withdrawn from bank accounts and cash deposited in the bank account were only out of such cash in hand. The contention so advanced by the assessee was not found acceptable to the Ld. CIT(A) as the latter found that the assessee failed to furnish any documentary evidence to substantiate its claim and addition so made by the AO were upheld.

Against the said findings and directions of the Ld. CIT(A), the assessee is in appeal before us.

During the course of hearing, the Ld. AR submitted that the Ld. CIT(A) has only considered a part of the submissions so made by the assessee during the appellate proceedings and has failed to consider the other contentions so advanced by the assessee. In this regard, our reference was drawn to the written submission filed by the assessee before the Ld. CIT(A) wherein it was submitted that the AO had failed to appreciate the fact that the cash deposited in the bank account was out of cash in hand available with the assessee which was on account of cash withdrawal from the bank account and opening cash in hand as on 01/04/2016. It was further submitted that given nature of the business, it was necessary to keep sufficient amount of cash in hand to make payments to workers or meet any exigency arising out of labour problems for which the assessee used to regular withdraw cash from the bank account by way of self cheques and ATM withdrawals and after meeting out business exigency, the remaining cash left over was deposited back in the bank account. It was submitted that the copy of the bank statement were placed on record which would show that there were sufficient cash withdrawn from the bank account. Further the assessee submitted date wise and bank wise details of such cash deposits and withdrawn wherein it can be appreciated that in the account number 5071201000038, there were cash withdrawal of Rs. 14,18,000/- wherein the cash was only deposited to the extent of Rs. 6,32,500/-, similarly in respect of bank account no. 324026100064, there were cash withdrawal of Rs. 14,49,000/- as against the cash deposit to Rs. 3,35,000/-. It was accordingly submitted that there were sufficient amount of cash which were withdrawn from the bank account which justifies that the assessee was having enough cash in hand and cash so deposited in the bank account was out of such cash in hand. It was accordingly submitted that the AO as well as the Ld. CIT(A) have failed to appreciate the factual position regarding the availability of cash in hand and has not been even allowed the benefit of opening cash in hand and the addition so made deserves to be deleted.

It was further submitted that the assessee has filed its return of income declaring total income under the provision of Section 44AD and the same has been accepted by the AO and in such circumstances, it is settled position that where the turnover and profit so declared has been accepted under section 44AD, the assessee is not required to explain each and every entry in respect of cash deposit in the bank account and in support, reliance was placed on the decision of Hon’ble Punjab & Haryana High Court in case of CIT Vs. Surinder Pal Anand (2010) 192 Taxmann 264 which has subsequently been followed in case of Sandeep Kumar Sanserwal Vs. ITO in dt. 03/07/2024.

It was submitted that all these contentions were raised before the Ld. CIT(A) and which find mention in the written submissions which have been placed as part of the assessee’s paper book at page 7 to 14 and the copy of the bank account statement as well as details of the cash deposit and details of cash withdrawal which find placed at page 35 to 38 of the assessee’s paper book. It was submitted that inspite of all these submissions and documentary evidence placed on record, the Ld. CIT(A) has sustained the addition so made by the AO. It was accordingly prayed that in light of the aforesaid submissions, the source of cash deposit has been duly explained and the addition so made by the AO and sustained by the Ld. CIT(A) be deleted.

Per contra, the Ld. DR has relied on the orders of the lower authorities.

We have heard the rival contentions and perused the material available on the record. The limited issue under consideration relates to source of cash deposit of Rs 9,55,000/- in the two bank accounts maintained by the assessee. On the perusal of the bank statements so placed on record, we find that there are regular cash withdrawals and deposits during the year and the withdrawals so made are sufficient to explain the source of cash so deposited and in context thereof, where we examine the explanation of the assessee, that given the nature of its construction business, it is required to maintain sufficient cash in hand for meeting its business requirements and there are cash withdrawals and deposits in the bank account from time to time and the source of cash deposit is out of earlier withdrawals made during the year, is found to be reasonable and acceptable in absence of any other adverse material available on record. In the result, we donot find any merit in sustenance of addition of Rs 9,55,000/- and the same is hereby directed to be deleted.