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Income Tax Appellate Tribunal, CHANDIGARH BENCHES ‘A’ CHANDIGARH
Before: SMT. DIVA SINGH & DR. B.R.R. KUMAR
PER DR. B.R.R. KUMAR, A.M:
The present appeal has been filed by the Assessee against the order of the Ld. CIT(A)-1, Ludhiana dt. 21/12/2016.
Assessee has raised the following effective grounds of appeal:
That the Ld. CIT(A) has grossly erred in upholding the addition of Rs. 41,00,000/- u/s 68 brushing aside the documentary evidence that assessee was having sufficient cash balance. 3. That the Ld. CIT(A) is not justified while upholding the orders of the AO simply by holding that "the said cash in hand is thus not acceptable as the surrounding circumstances disapprove the appellants claim" totally ignoring the factual matrix that cash was withdrawn from another partnership firm of the assessee. 4. That the Ld. CIT(A) has grossly erred in upholding the addition of disallowing interest paid at Rs. 18,48,006/- and wrongly claimed under section 57 of the Act, instead of section 37 of the Act.
Brief facts of the case are that the assessee is doing the business of "Trading of hosiery goods, cloth, duplex board etc". Assessee shown income under the head Income from Business and profession' and under the head
'Income from House Property' during the year under consideration. Assessee has also claimed loss under the head 'Income From Other Sources'.
The Assessing Officer made addition of Rs. 41,00,000/- under section 68 of the Income Tax Act, 1961 on account of addition to capital account in cash. Before the Assessing Officer the assessee has submitted that the addition in Capital account was made out of cash in hand in assesses's personal account.
4.1 The Assessing Officer held that no supporting documents were furnished and no justification or source of addition was provided. During the course of assessment proceedings a statement showing individual cash in hand was filed by the assessee.
4.3 The Assessing Officer observed that as per details of personal cash in hand, assessee was having an amount of Rs. 49,76,258/- as on 01-04-2011. Assessee is also withdrawing cash from the bank during the year when he was having huge cash in hand in individual capacity. The Assessing Officer placed reliance on the case of CIT Vs Durga Prasad More (1971) 82 ITR 540 in which the Hon'ble Supreme Court has held that Income-tax authorities are entitled to look into the surrounding circumstances to find out the reality. And also on the case of Hon'ble Supreme Court in Sumati Dayal Vs CIT (1995) 214 ITR 801. In these cases Hon'ble Supreme Court has held that to judge any evidence test of human probabilities should be applied.
4.4 The Assessing Officer held that the Assessee could not justify the human probabilities on the following issues:
i) The assessee has not given any reason for maintaining huge cash in hand.
ii) The assessee has been paying interest on borrowed funds despite the availability of huge funds.
iii) The assessee has not deposited cash allegedly in his possession at one go and instead he has deposited cash on various dates during the year.
iv) The assessee has been withdrawing cash from bank despite the availability of cash in hand and
v) The assessee has not produced any independent information to verify his claim.
4.5 The Assessing Officer further held that there are sufficient reasons to suspect the addition in the books of accounts as capital additions by the assessee. Onus to prove that the cash in hand was not bogus was with the assessee and the assessee could not discharge his onus in this regard. During the course of assessment proceedings counsel of the assessee was also confronted and asked to file the copy of his Wealth Tax Return for the A.Y. 2012-13 because such a huge cash in hand in individual capacity is liable to be taxed under Wealth Tax Act. In response to this counsel of the assessee submitted that no Wealth Tax Return was filed by the assessee for the relevant assessment year i.e for the A.Y. 2012-13.
4.6 Subsequently the Assessing Officer held that the an amount of Rs. 41,00,000/- needs to be taxed in the hands of the assessee on account of income from undisclosed sources u/s 68 of the Income tax Act 1961. Aggrieved the assessee filed appeal before the Ld. CIT(A).
The Ld. CIT(A) confirmed the addition holding as under:
I have carefully considered the facts of the case, the basis of the addition made and the arguments of the AR. A perusal of the capital account showed that the appellant had introduced Rs. 41 lacs in his proprietorship firm, M/s Shanti Knit Fab. When asked to supply the source and justification thereof, the counsel submitted before the Assessing Officer that the same was out of cash in hand in assessee's personal account. A statement showing individual cash in hand was filed by the appellant before the Assessing Officer. However, no other supporting document was furnished and no justification was given. The Assessing Officer has observed that the appellant was withdrawing cash from the bank during the year although he is showing cash in hand in individual capacity. Simultaneously, the appellant is claiming huge amount of interest paid to various parties. The appellant could not explain why the so stated huge cash hand was kept with him and not deposited in the bank and also why there was a need to withdraw from banks if he had sufficient cash in hand as shown. Therefore, the facts and circumstances prove the contrary and the said cash in hand is thus not acceptable as the surrounding circumstances disprove the appellant's claim regarding the same. No justification has been given as to why such huge cash in hand is maintained and no independent evidence is produced to support the purpose of maintaining the so stated cash in hand, thus the Assessing Officer rightly held that the cash in hand does not appear to be genuine as the appellant has been withdrawing cash from the bank and has also been paying huge amount of interest on loans from private lenders. It may be added that no wealth tax return has also been filed though huge cash in hand of Rs. 41 lacs has been shown to be available. Therefore, the Assessing Officer was justified in holding that actually the appellant has introduced his own unaccounted money in his business. Therefore, the said amount was rightly added back to the income of the appellant u/s 68 as income from undisclosed sources. This ground of appeal is dismissed.
6 Before us the Ld. AR argued that the assessee was having opening amount of cash in hand of Rs. 49,76,258/- as on 01/04/2011 and relied on the submissions made before the Ld. CIT(A) and also on the copy of accounts of the assessee and audit reports.
The Ld. DR relied on the orders of the lower authorities.
From the perusal of the above we observed that the reason for confirming is that the assessee could not furnish any supporting documents and at the same time questioning why the such huge cash in hand was kept with him and not deposited in the bank.
The Ld. CIT(A) also relied on the fact that no Wealth Tax have been filed by the assessee to prove the existence of cash in hand. Similarly we also found that the assessee could have proved the availability of the cash by submitting relevant bank statements and withdrawals. Nowhere on records the relevant bank statement are available nor it appears to have been examined by the lower authorities at any given point of time. The accumulation of funds of Rs. 49,76,258/- has also not been examined by the Revenue as well as not produced by the assessee before the lower authorities in a cogent manner so as to prove the availability of the cash. Thus the moot issue of availability of the cash as for the opening balance has not been examined and no finding on this fact has been given by the Revenue or the Assessee has not submitted the relevant details. Under these circumstances we deem it fit that the interest of justice would be met by remanding the matter back to the Assessing Officer for the limited purpose of examining the availability of the cash and also with the directions to the assessee to prove the availability of cash by placing relevant bank statements and submitting the details of the cash withdrawals.
Ground No. 4 relates to upholding the addition of interest paid of Rs. 18,48,006/-.
The brief facts of the issue are that the Assessing Officer has held that the deduction claimed u/s 57 of the Act is not admissible in view of the facts that the expenditure claimed by the assessee under the head 'Income From Other
Sources' is not within the purview of section 57(iii) of the Act and was not incurred wholly and exclusively for the purpose of earning the income. 12. Ld. CIT(A) upheld the addition by holding that the assessee has received interest from M/s Shanti Sales India Pvt. Ltd. besides interest on Fixed Deposits and Saving Bank Account. The assessee could not explained how the expenditure was relatable to activity of earning income and the details of interest paid have not been submitted.
Before us the Ld. AR reiterated the submissions filed before the lower authorities.
The Ld. DR relied on the order of the Ld. CIT(A).
We find that the assessee has not given the complete details regarding the incurring of expenditure on account of the interest payments. Hence the matter is hereby remanded back to the file of Assessing Officer with a direction to the assessee to submit complete details of the expenditure and to furnish how the expenditure incurred is wholly and exclusively incurred for the purpose of business so as to be eligible for deduction under section 57(iii).
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court.
Sd/- Sd/- (DIVA SINGH) (DR. B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 07/03/2018 AG
Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR