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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: Dr. B. R. R. KumarShri Yogesh Kumar US
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by assessee against the order of NFAC/Ld. CIT(A), Delhi dated 09.04.2021.
The only addition made by the Assessing Officer is on account of cash deposited in the bank account during the demonetization period amounting to Rs.35,00,000/- under Section 68 of the I.T. Act, confirmed by the ld. Commissioner of Income Tax (Appeals).
Undisputedly, the assessee had deposited an amount of Rs.35,00,000/- in its bank account during the demonetization period, which, as per the assessee was deposited out of the P L Steels P. Ltd. regular cash book of the assessee having opening balance in hand, cash withdrawals and a small amount of cash sales.
The Assessing Officer rejecting the contention of the assessee, on the basis of the fact that demonetization happened in the year under consideration made the addition. Relevant findings of the AO are at Page 4 of the Assessment order.
Before the ld. CIT(A), bringing all the documentary evidences on record, the assessee contended that an amount of Rs.3,06,780/- was its opening cash in hand, Rs. 15,20,000/- was the cash withdrawals made by the assessee before the cash deposit and the remaining amount deposited by it was out of cash sales by the assessee company. Rejecting the contention of the assessee, the ld. CIT(A) confirmed the action of the AO in making the addition. The findings of the ld. CIT(A) are at Page 14, Para 6.5.1 onwards of his order.
The main reason for confirming the addition by the ld. CIT(A) was that the assessee had made withdrawals from the bank account despite having cash in its hand. He did not comment on the opening cash in hand held by the assessee and with respect to the cash sales, the ld. CIT(A) held that the assessee has not furnished any satisfactory explanation.
Heard the arguments of both the parties and perused the material available on record.
The assssee is a company engaged in the business of manufacturing of steel. Being a company, the books of account
P L Steels P. Ltd. of the assessee were statutorily audited and also the tax audit was conducted. The turnover of the assessee in the year under consideration is more than Rs.31 Crores and it had disclosed an income of Rs.1.5 Crores in its return of income. The assessee is not denying the fact that it had deposited an amount of R.35 Lakhs in the bank account during the demonetization period. The bifurcation of the source of cash given by the assessee before the lower authorities was as under:-
- Opening cash in hand : Rs. 3,06,780.00 - Cash deposit out of cash withdrawals : Rs. 15,20,000.00 - Cash sales : Rs. 12,20,068.00 9. With respect to the cash in hand at the opening of the year, as the same amount was the closing balance of cash in hand in the preceding year. The figure can be co-related from the Balance Sheet of the assessee, PB Pg.
4. With respect to cash deposited out of cash withdrawals, the fact of withdrawing cash from banks has not been disputed by the Assessing Officer or the ld. CIT(A). These withdrawals could also be checked from the copy of the bank statement placed at PB Pg. 31 onwards.
For the remaining cash deposited, the explanation of the assessee was that it was out of the cash sales made by the assessee. The details of cash sales during the period 01.04.2016 to 08.11.2016 is placed at PB Pg.
This page also contains the details of cash sales made by the assessee in the earlier year. There is a very marginal difference in the cash sales of these two years as the same was Rs.9,24,404/- in the preceding year while in the year under consideration it was Rs.12,20,068/-. Copies of sale invoices are placed at PB Pg. 46- P L Steels P. Ltd.
The assessee had filed its VAT return (PB Pg. 51-71) which was not revised by the assessee. It is to be appreciated that these cash sales were included in the total turnover of the assessee which was duly declared by it in its financial statements and also in the return of income. The lower authorities have nowhere doubted the sales shown by the assessee and the books of account of the assessee also were not rejected. In view of the absence of any such finding, not accepting the contention of the assessee that the cash deposited was out of these cash sales, which amounts to only 0.4% of the total sales by the assessee is acceptable.
The details of opening cash in hand, cash receipt from cash sales, cash withdrawal from bank up to the date of demonetization is produced in the following tabulated form:
Opening Cash in hand as on 01.04.2016 3,06,780 3,06,780 Cash Withdrawal from Canara Bank on 11-04- 2016 2,00,000 5,06,780 Cash Sales on 12-04-2016 22,890 5,29,670 Cash Withdrawal from Canara Bank on 19-04- 2016 1,00,000 6,29,670 Cash Sales on 29-04-2016 22,050 6,51,720 Cash Withdrawal from Canara Bank on 02-05- 2016 4,00,000 10,51,720 Cash Withdrawal from Canara Bank on 20-05- 2016 70,000 11,21,720 Cash Sales on 04-06-2016 53,760 11,75,480 Cash Sales on 02-08-2016 42,336 12,17,816 Cash Withdrawal from Canara Bank on 20-09- 2016 2,50,000 14,67,816 Cash Sales on 21-09-2016 42,840 15,10,656 Cash Sales on 22-10-2016 44,940 15,55,596 Cash Sales on 01-11-2016 9,69,623 25,25,219 Cash Sales on 02-11-2016 21,630 25,46,949 Cash Withdrawal from Canara Bank on 02-11- 2016 5,00,000 P L Steels P. Ltd.
The above data represents the details of cash flow prepared on the basis of data provided by the appellant company during the assessment proceedings as well as in the appellate proceedings by the ld. CIT(A). In the tabulated data figures of opening cash in hand at the starting of financial year, cash received from the cash sales, cash withdrawal from bank upto date of demonetization has been produced. From the above, table prepared by the ld. CIT(A) it can be held that the assessee had sufficient declared cash available for deposting in the bank account.
14. Reliance is placed on the following judgments:
M/S. Rama Hygienic Products Pvt. Ltd. Versus ACIT, Cc-14, Delhi And (Vice-Versa And ITA No. 2006/Del/2023, dt.27.09.2023 "13. The bench is of considered view that assessee should not be expected to establish the cash flow from cash sales with mathematical precisions and what is essential is to establish that on preponderance of probability the business of assessee was able to generate surplus cash to be deposited in the bank. Only because the period under examination is of demonetisation that does not change the basic principle with regard to discharge of burden of proof for purpose of Section 68 of the Act. The nature of business of the assessee was one which would have been directly affected by market forces, where whole sale dealers and customers would have used SBNs for cash purchases. To allege without any evidence that there can be possibility that the appellant might have booked these sales in books by 08.11.2016 to deposit the SBNs, but actually made sales thereafter, to keep the stock as per books, on mere conjectures is not sustainable. The Ld. CIT(A) has accepted the major part of the cash deposits on basis of examination of all information about sales, purchases, stock etc. but to disbelieve part on the basis of mere assumptions is not justified. Long back in the case of Lakshmi Rice Mills (1974) 97 ITR 258 (Patna), it has been held that, when books of account of the assessee were accepted by the revenue as genuine and cash balance shown therein was sufficient to cover high denomination notes held by the assessee, then the assessee was not P L Steels P. Ltd. required to prove source of receipt of said high denomination notes which were legal tender at that time.
The claim of the appellant that such addition resulted into double taxation of the same income in the same year is also acceptable because on one hand cost of the sales has been taxed after deducting gross profit from same price ultimately credited to profit & loss account) and on the other hand cash sales subjected to reported income are added u/s. 68 of the Act. Consequently we are inclined to accept the grounds raised
by assessee." DCIT vs. Smt. Veena Awasthi, dt.30.11.2018
8. We have perused the case record and heard the rival contentions. We find that addition has been made by the Assessing Officer, as is evident from his order, on the ground that he has come to the conclusion that cash deposits were from some other source of income which is not disclosed to the Revenue. Assessing Officer nowhere in his order has brought out any material on record to show that assessee is having any additional source of income other than that disclosed in the return nor Assessing Officer could spell out in his order that cash deposits made by the assessee was from some undisclosed source. All throughout Assessing Officer has raised suspicion on the behavioral pattern of frequent withdrawal and deposits by the assessee. There is no law in the country which prevents citizens to frequently withdraw and deposit his own money. Documentary evidences furnished before the Revenue clearly clarifies that on each occasion at the time of deposit in her bank account, assessee had sufficient availability of cash which is also not disputed by the Revenue. Entire transaction of withdrawals and deposits are duly reflected in the bank account of the assessee and are verifiable from relevant records." Neeta Bareja Vs. ITO, ITA No. 524/Del/2017 dated 28.08.2019
12. In the present case also the learned assessing officer or the learned CIT A did not show that above cash was not available in the hands of the assessee or have been spent on any other purposes. Further the coordinate bench in ACIT vs Baldev Raj Charla 121 TTJ 366 (Delhi) also held that merely because there was a time gap between withdrawal of cash and cash deposits explanation of the assessee could not be rejected and addition on account of cash deposit could not be made particularly when there was no finding recorded by the assessing officer or the Commissioner that apart from depositing this cash into bank as explained by the assessee, P L Steels P. Ltd. there was any other purposes it is used by the assessee of these amounts. In view of above facts, the ground number 1 of the appeal of the assessee is allowed and orders of lower authorities are reversed." CIT vs. Kulwant Rai(2007) 291 ITR 36 (Delhi-HC) "16. This cash flow statement furnished by the assessee was rejected by the AO which is on the basis of suspicion that the assessee must have spent the amount for some other purposes. The orders of AO as well as CIT(A) are completely silent as to for what purpose the earlier withdrawals would have been spent. As per the cash book maintained by the assessee, a sum of Rs. 10,000 was being spent for household expenses every month and the assessee has withdrawn from bank a sum of Rs. 2 lacs on 4th Dec., 2000 and there was no material with the Department that this money was not available with the assessee. It has been held by the Tribunal that in the instant case the withdrawals shown by the assessee are far in excess of the cash found during the course of search proceedings. No material has been relied upon by the AO or CIT(A) to support their view that the entire cash withdrawals must have been spent by the assessee and accordingly, the Tribunal rightly held that the assessment of Rs. 2.5 lacs is legally not sustainable under s. 158BC of the Act and the same was rightly ordered to be deleted."
Thus, after going through the entire factum and the relevant case laws, we hold that the opening cash in hand was not in dispute, the cash withdrawals were not in dispute and the cash sales have been proved by the way of audit report and the VAT returns. Hence, we cannot sustain the decision of the ld. CIT(A) that the cash cannot be withdrawn and kept at home which is the only reason for confirming the addition.