|The Tax Publishers2020 TaxPub(DT) 5078 (Visakhapatnam-Trib)
INCOME TAX ACT, 1961
While taxing the cash deposits, AO could not ignore the withdrawals and opening cash balance available to assessee and credit need to be given to the source available from the application of funds. Therefore, addition made under section 68 was not justified as AO had taxed the sources and application of funds without giving any credit to the availability of sources.
Income from undisclosed sources - Addition under section 68 - AO taxed cash deposits without giving credit to availability of sources -
During the course of assessment proceedings, AO found that assessee-firm made cash deposits of Rs. 1,76,28,550 and made the investments for purchase of car, introduction of capital in firms, expenditure incurred on foreign tours and some amount was given to his son and total sums representing cash deposits, the investments and the expenditure incurred aggregated to Rs. 2,27,70,550, which was brought to tax as income from undisclosed sources. Assessee explained before AO as well as CIT (A) that the source of deposit was receipt of cash from Late Sri TMV Prasada Rao, Vijayawada out of sale consideration agreed at Rs. 2.50 crores for purchase of property. However, AO rejected assessee's explanation and made the addition. Held: AO had taxed the sources and application of funds without giving any credit to the availability of sources. Thus, AO did not appreciate the information available before him properly. AO did not disprove the statement given by daughter Y.Indira of Late Sri TMV Prasada Rao with proper evidence. Neither the sale agreement was disproved nor the existence of ownership of 6000 sq.ft. at Victory Complex was disputed by AO. Therefore, there was no reason to reject the contention of assessee that he had received on money from late TMV Prasada Rao. Assessee was regularly assessed to wealth tax and as per the wealth tax returns. While taxing the deposits of 1,76,28,550, AO could not ignore the withdrawals and opening cash balance available to assessee and credit need to be given to the source available from the application of funds. Though there was mismatch in dates with regard to deposits and withdrawals, the entire withdrawals could not be brushed aside. AO ought to have made cash flow statement with opening cash balance, deposit and withdrawal and given due credit for the available sources. Instead, AO chosen to tax the entire investments without giving credit for the available sources. It was clear that assessee was having Rs. 2 crores of cash available to him and deposit made was Rs. 1,76,28,550 and still there was some more cash balance which was available to assessee to meet the investments or expenses. Therefore, CIT(A) had rightly allowed the relief of Rs. 2,00,28,550 comprising of opening balance and withdrawals from the bank account and confirmed the balance addition.
FAVOUR : In assessee's favour.
A.Y. : 2012-13
IN THE ITAT, VISAKHAPATNAM BENCH
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