ARYA ASSOCIATES INDIA PVT. LTD.,VARANASI V. INCOME TAX OFFICER, WARD - 3(3), CHANDAULI

ITA 43/VNS/2022

AI Insights

The case involves Arya Associates India Pvt. Ltd., which appealed against the order of the CIT(A) confirming the addition of Rs. 35,00,000 to its income for the Assessment Year 2017-18. The addition was based on the Income Tax Officer's (ITO) view that the cash deposit made during the demonetisation period was unexplained. The ITO rejected the company's books of account, suspecting that the cash might have been invested in other business activities. However, the Tribunal found that the ITO's conclusions were based on surmise and conjecture without any material evidence, and thus, the books of account should be accepted as they were audited and showed a sufficient cash balance.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473599 (ITAT-VARANASI)
• Duration Of Justice: 1 year(s) 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-09-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 28-10-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAVITA MEENA
• Assessee Lawyers: AKASH AGRAWAL
• Keywords: Set aside; Rejection of books of accounts

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, VARANASI BEFORE: SHRI B.R. BASKARAN, ACCOUNTANT MEMBER & SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA No.43/VNS/2022 (Assessment Year :2017-18) Arya Associates India Private Limited 4/815, Shashtri Chowk Ram Nagar, Pracheen Varanasi Vs. Income Tax Officer Ward -3(3) Chandauli Uttar Pradesh PAN/GIR No.AAKCA2553M (Appellant) .. (Respondent) Assessee by Shri Akash Agrawal, CA Revenue by Smt. Kavita Meena, Sr. DR Date of Hearing 10/09/2024 Date of Pronouncement 15/10/2024 आदेश / O R D E R PER B.R. BASKARAN (A.M): The assessee has filed this appeal challenging the order dated 31/08/2022 passed by ld. CIT(A), NFAC, Delhi and it relates to the A.Y.2017-18. 2. The assessee is aggrieved by the decision of the ld. CIT(A) in confirming the addition of Rs.35,00,000/- relating to cash deposit made into bank account of the assessee. Though the assessee has raised a legal issue with regard to validity of ITA No.43/VNS/2022 Arya Associates India Pvt. Ltd. 2 notice issued u/s.143(2) of the Act, the AR did not press the same at the time of hearing. 3. The facts relating to the case are stated in brief. The assessee is a private limited company engaged in the business of providing cable television devices and internet related services. It filed return of income for the year under consideration declaring a loss of Rs.1,21,163/-. It was noted that the assessee has made cash deposit of Rs.35.00 lakhs into its bank account during demonetisation period. Hence, the return of income filed by the assessee was taken up for scrutiny. The assessee explained that the above said deposit was made out of the cash balance available in its books of account. i/e/. the cash deposit of Rs.35,00,000/- was made on 02/12/2016 out of the cash balance of Rs.58,67,312/- available with the assessee on that date. The AO noticed that the assessee was withdrawing cash on various dates even though sufficient cash balance was available in the books of account. Accordingly, the AO took the view that the assessee might have invested book balance of cash in some other business activity and concealed the relevant facts from the department. He further, noticed that the assessee had deposited cash of Rs.35,00,000/- into bank account after 24 days from the date of announcement of demonetisation. With these observations, he rejected the books of accounts of the assessee. Accordingly, the AO inferred that the assessee was not having any money physically with it during that period. Accordingly, he took a view that the impugned deposit of Rs.35,00,000/- is unexplained money and assessed the same ITA No.43/VNS/2022 Arya Associates India Pvt. Ltd. 3 as income of the assessee u/s.69A of the Act. The ld. CIT(A) confirmed the same. 4. We heard the parties and perused the record. We noticed that the assessee is a private limited company and its books of account were audited. There is no dispute that the books of accounts of the assessee disclosed availability of sufficient cash balance, out of which the impugned deposit of Rs.35,00,000/- has been made. We noticed that the AO has rejected the books of account with the following observations:- “10. From the above reply, it is clear that the assessee has withdrawn money from bank account of the company and probably invested in any other business activity and concealed the facts from the department. The assessee has no cash in physical form on the date of demonetization i.e 08/11/2016. The assessee has collected the money for depositing the cash into the bank accounts. Specified Bank Notes may be deposited as earliest as possible but the assessee has deposited SBNs of Rs. 35,00,000/- after 24 days of announcement of demonetization because the assessee has no money in physical form during that period. 5. From the observations made by the AO, we noticed that the Assessing Officer has drawn adverse inferences only on surmise and conjecture. The AO did not bring any material on record to show that the book balance available with the assessee was actually invested anywhere else. Hence, this cannot be a reason to reject the books. The delay in depositing the money, in our view, cannot be also a reason for rejecting the books of account. In effect, the AO did not find any fault with the audited books of account furnished by the ITA No.43/VNS/2022 Arya Associates India Pvt. Ltd. 4 assessee, meaning thereby, no sufficient reason was given by the AO to reject the book results. Accordingly, we hold that the AO was not justified in rejecting the books of account. In that case, the books of accounts furnished by the assessee should be accepted. Since the assessee was having sufficient cash balance in its books of account, in our view, the impugned deposits of Rs.35,00,000/- would stand explained. Accordingly, in the facts and circumstances of the case, we are of the view that there is no reason for the AO to treat the impugned deposit of Rs.35,00,000/- as ‘unexplained money’. Accordingly, we set aside the order of the ld. CIT(A) and direct the AO to delete the addition of Rs.35,00,000/- referred above. 6. In the result, appeal filed by the assessee is allowed. Order pronounced on 15/10/2024 by way of proper mentioning in the notice board. Sd/- (AMIT SHUKLA) Sd/- (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 15/10/2024 Mumbai. KARUNA, sr.ps ITA No.43/VNS/2022 Arya Associates India Pvt. Ltd. 5 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Varanasi 1. The Appellant 2. The Respondent. 3. The CIT(A), Varanasi. 4. CIT 5. DR, ITAT, Varanasi 6. Guard file. //True Copy// "