The Tax Publishers2021 TaxPub(DT) 0523 (Bang-Trib) : (2020) 084 ITR (Trib) 0300

INCOME TAX ACT, 1961

Section 69

Where source of funds deposited in assessee's bank account was out of cash received in the course of business, which was duly reflected in his cash book and further, correctness of the cash book was not doubted; it could be said that the source of funds for cash deposit in the bank account stood duly explained and accordingly, the addition made on account of unexplained cash deposit was liable to be deleted.

Income from undisclosed sources - Addition under section 69 - Unexplained cash deposits - Source of deposit duly explained

Assessee deposited cash in his bank account. Since the source of funds remained unexplained, AO added 50% of the cash deposited in the bank account. Assessee claimed before CIT(A) that the source of funds was out of cash received in the course of business, which was duly reflected in his cash book. Thus, CIT(A) called for a remand report from the AO on the issue. AO gave a remand report, in which he accepted that the source for cash deposits made by assessee stood explained. However, he submitted in the remand report that he had some doubts about genuineness of cash balance as per books of account and also submitted that he was unable to vouch the veracity of the books produced before him by assessee in the remand proceedings. Therefore, CIT(A) agreed that the addition made by the AO on account of unexplained cash deposit was justified; however, he gave benefit of telescoping and hence, reduced the addition. Held: AO having accepted the correctness of the cash book maintained by the assessee was not justified in expressing some doubts on genuineness of such cash book. As argued by him, the fact that there was low cash balance during the opening and closing days of the financial year and maintenance of huge balance in a particular period, could not be the basis to doubt the genuineness of the cash book. Similarly, the fact that cash was withdrawn from bank, despite cash balances being available in the cash book, could not be the basis to doubt the genuineness of the cash book. Further, the presence of sundry creditors and the fact that the assessee could have discharged sundry creditors, instead of having cash in hand, could not also be the basis to doubt the genuineness of the cash availability as per cash book. Therefore, the addition sustained by the CIT (A) was deleted as the source of funds for cash deposit in the bank account stood duly explained.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16



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