Source of cash deposits can't be discarded if shown On Cashbook Entries: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that a cash flow statement based on the entries made in the cash book reveals the source of cash deposited in the bank account and cannot be discarded by the authorities below.

The two-member bench of Kul Bharat (Judicial Member) and N.K. Billaiya (Accountant Member) has directed the Assessing Officer to delete the addition of Rs. 7,65,000.

The assessee/appellant preferred the appeal against the order framed by the National Faceless Appeal Centre pertaining to A.Y. 2017–18.

The assessee filed her return of income, declaring an income of Rs. 7,92,90. The assessee returned rental income and income from other sources. The return of income was selected for scrutiny assessment for scrutiny of cash deposits during the demonetization period, and, accordingly, the assessee was given cause to furnish an explanation regarding cash deposits during the demonetization period.

The assessee stated that cash deposits were made from opening cash in hand and cash withdrawals were made during the fiscal year in question prior to demonetization.

The Assessing Officer considered the assessee's response and concluded that aside from the opening cash in hand of Rs. 8, 34, 821, the assessee could not satisfactorily explain the source of the cash deposit of Rs. 11, 90, 179.

The Assessing Officer concluded the assessment proceedings by accepting the opening cash in hand of Rs. 8,34,821 and adding Rs. 11,90,79 in accordance with Section 69A read with Section 115BBE of the Income Tax Act.

The assessee filed an appeal with the CIT(A), explaining the source of the cash deposit in the bank account once more.

It was once again explained that other than the opening cash in hand of Rs. 8,34,821, all other deposits have been made out of cash withdrawals from the bank during the financial year. In addition, a cash flow statement and a statement of affairs were also filed by the assessee.

The CIT(A) completely ignored the Assessing Officer's findings and tainted the entire proceeding by claiming that the opening cash balance of Rs. 8,34,821 was not declared in the online income tax return.

The ITAT noted that the cash book clearly shows the opening balance as of April 1, 2016 at Rs. 8,34,821, which has been duly verified and accepted by the Assessing Officer. The cash flow statement clearly explains the cash deposit in the bank account.

"We fail to understand as to when the availability of opening cash in hand amounting to Rs. 8,34,821/- has been verified and accepted by the Assessing Officer, then, why the CIT(A) estimated the same at Rs.1 lakh. Further, when cash withdrawals have been duly reflected in the cash book, vis a vis, bank statement for the FY under consideration, why the same was not accepted by the CIT(A) when no defect has been pointed out in cash books, cash flow statement and statement of affairs filed by the assessee," the Tribunal stated.

Case Title: Smt. Perminder Kaur Matharoo Versus The I.T.O

Citation: ITA No. 840/DEL/2021 [A.Y 2017-18]

Date: 15.11.2022

Counsel For Appellant: Advocate Kapil Goel

Counsel For Respondent: Sanjai Kumar Yadav

Click Here To Read Order