Naynaba Ashoksinh Jedeja, Surat V. Income Tax Officer, Ward-1(3)(8), Surat

ITA 423/SRT/2023

AI Insights

The case revolves around an appeal by Naynaba Ashoksinh Jadeja against the order of the Learned Commissioner of Income Tax (Appeals), which confirmed the addition of Rs.34,10,000 as unexplained cash credit by the Assessing Officer. The addition was initially made due to a perceived discrepancy in the cash balances reported in the financial years 2014-15 and 2015-16. The assessee argued that the cash was merely reclassified from 'safe custody' to 'cash in hand' without any actual increase in cash holdings. The Tribunal examined the detailed financial records and entries provided by the assessee, concluding that the cash was accounted for correctly and the addition was unjustified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301494 (ITAT-SURAT)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-08-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 21-06-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 68; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT (SMC) BENCH BEFORE SHRI DR. A. L. SAINI, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.423/SRT/2023 Assessment Year: (2016-17) (Physical Hearing) Naynaba Ashoksinh Jadeja, A/401, Nova Apex, B/h. Snehsankul Wadi, Adajan, Anand Mahal Road, Surat - 395009 Vs. The ITO, Ward – 1(3)(8), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ADDPJ2697Q (Appellant) (Respondent) Appellant by Shri Tinish R. Mody, CA Respondent by Shri Vinod Kumar, Sr. DR Date of Hearing 23/08/2023 Date of Pronouncement 31/08/2023 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2016-17, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], National Faceless Appeal Centre (in short ‘the NFAC’), dated 26.05.2023, which in turn arises out of an assessment order passed by Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 30.12.2018. 2. The grounds of appeal raised by the assessee are as follows: “1. On the facts and in the circumstances of the case, as well as law on the subject, the Learned CIT-(A) NFAC Delhi erred confirming the addition of Rs.34,10,000/- made by the Ld assessing officer treating the cash lying as safe custody as unexplained cash credit u/s 68 of the I.T. Act, 1961 without proper appreciating the fact of the case. Page | 2 ITA.423/SRT/2023/AY.2016-17 Naynaba Ashoksinh Jadeja 2. On the facts and in the circumstances of the case, as well as law on the subject, the Learned CIT(A) NFAC Delhi ought to have appreciated the submission as well as evidences filed before him favourably.” 3. The facts necessary for disposal of this appeal are stated in brief. During the course of assessment proceedings, the assessing officer noted that the closing cash balance as per assessment year (AY) 2015-16, as on 31/03/2015, was to the tune of Rs.2,30,459/-. However, in the cash book, as on 01/04/2015, the opening cash balance was shown at Rs.36,40,459/- Thus, the assessing officer noted that the excess opening cash balance of Rs.34,10,000/- (Rs.36,40,459- Rs.2,30,459) was shown by the assessee. Therefore, assessing officer issued a show cause notice to explain the cash in hand. In response to the show cause notice, during the course of assessment proceedings, the assessee claimed that the 'cash lying as safe custody' shown under the head 'loans & advances' amounting to Rs.34,10,000/- as on 31/03/2015, which has been carried forward in the subsequent year on 01/04/2015. The assessee had replied to the assessing officer that part of the cash was lying in safe custody from assessment year (AY) 2013-14, and the same was existed in the books of accounts. However, the assessing officer did not accept the explanation of the assessee and made addition of Rs.34,10,000/- u/s 68 of the IT Act. 4. On appeal, the ld CIT(A) has confirmed the action of the assessing officer, therefore, the assessee is in further appeal before this Tribunal. 5. Shri Tinish R. Mody, Learned Counsel for the assessee, argued that assessee has shown in the income tax return, filed with the Department, the balance of current assets, as on 31.03.2013, to the tune of Rs.13,48,639/-, likewise balance as on 31.03.2014, Page | 3 ITA.423/SRT/2023/AY.2016-17 Naynaba Ashoksinh Jadeja Rs.52,22,500/-, balance as on 31.03.2015 Rs.34,13,639/- and balance as on 31.03.2016 Rs.26,11,030/-. These were the balances of current assets including cash in hand in the balance sheets filed by the assessee to the Income Tax Department. Therefore Ld. Counsel contended that as per the policy of the assessee, the assessee has used to maintain cash in hand, and over and above the safe cash deposit in the form of cash, which is shown and disclosed by the assessee, to the Income tax Department. As a matter of policy, the assessee maintains under the head, other current asset, the safe deposit, which contains the balance of cash amounting of Rs.34,11,000/- which was added by the Assessing Officer. The Ld. Counsel submitted that Assessing Officer himself has noted that cash balance of Rs.34,10,000/- was lying under the head of ‘safe custody’ which is recorded in the books of accounts of the assessee and reflected under the head of current assets/loans and advances. However, the Assessing Officer has considered the cash in hand as an opening balance to the tune of Rs.2,30,459/- which was deducted by him from the opening cash balance of Rs.36,40,459/- as on 01.04.2015 and worked out the difference to the tune of Rs.34,10,000 (Rs.36,40,459 – Rs.2,30,459). The Ld. Counsel contended that the assessee has passed the adjustment entry to transfer the cash in ‘safe custody’ account, which is a genuine adjustment entry and without looking into the correct aspect, the Assessing Officer made addition, which is not justifiable. Therefore, Ld. Counsel contended that addition made by the Assessing Officer may be deleted. 6. On the other hand, Learned Departmental Representative (ld. DR) for the Revenue submitted that assessee has not explained the reasons that why he has passed the adjustment entry. The assessee has Page | 4 ITA.423/SRT/2023/AY.2016-17 Naynaba Ashoksinh Jadeja also not explained that why he is showing some cash balance under the head ‘safe custody, instead of showing the cash under the head ‘cash balance’, therefore it raises doubt and hence Assessing Officer has made the addition, which should be upheld. 7. I have carefully considered the facts of the case, material as are available on record and written reply / explanation furnished on behalf of the assessee and arguments of ld DR for the Revenue. Before me, the assessee has submitted the following documents and evidences, Viz: (i) Copy of Return of income (ROI) for AY.2016-17 along with computation of income, profit and loss account, balance sheet and capital account (vide Pb.28 to 33), (ii) Bank statements for AY.2016-17 (vide Pb.34 to 42), (iii) Balance sheet of the assessee for AY.2013-14 (vide Pb.43), (iv) Name and address of the parties from whom cash and cheque were received for AY.2013-14 in a chart format (vide Pb.44), (v) Summary of Cash Flow for AY.2013-14 (vide Pb.45), (vi) Cash Book for AY.2013-14 (vide Pb.46 to 48), (vii) Balance Sheet of the assessee for AY.2014-15 (vide Pb.49), (viii) Name & address of parties from whom cash and cheque were received for AY.2014-15 in a chart format (vide Pb.50 to 51), (ix) Summary of cash flow for AY.2014-15 (vide Pb.52), (x) Cashbook for AY.2014- 15 (vide Pb.53 to 57), (xi) Balance sheet of the assessee for AY.2015- 16 (vide Pb.58), (xii) Name & address of parties from whom cash and cheque were received for AY.2015-16 in a chart format (vide Pb.59), (xiii) Summary of cash flow for AY.2015-16 (vide Pb.60), (xiv) Cash book for AY.2015-16 (vide Pb.61 to 66), (xv) Name & address of parties from whom cash and cheque were received for AY.2016-17 in a chart format (vide Pb.67), (xvi) Summary of cash flow for AY.2016- 17 (vide Pb.68), (xvii) Cash book for AY.2016-17 and safe custody Page | 5 ITA.423/SRT/2023/AY.2016-17 Naynaba Ashoksinh Jadeja a/c for AY.2016-17 (vide Pb.69 to 72) and Ledger copy of safe custody A/c for FY.2014-15 & FY.2015-16 (vide Pb.87) and Cash summary statement for AY.2013-14 to AY.2016-17 (vide Pb.88 to 91). 8. From the above documents, evidences, and cash flow statement of assessee for various assessment years, clearly state that assessee has been maintaining ‘safe custody account, as a matter of policy, which has been shown by the assessee under the head liquid assets/current assets. The ‘safe custody account, is cash in hand only which has been shown by the assessee under different nomenclature / head. With help of ‘safe custody account’, the assessee has explained the entire cash in hand with assessee. In fact, the cash of Rs.34,10,000/- was shown as “safe custody” under the head “Loans and Advances” in books of accounts in the immediately preceding previous year i.e. AY.2015-16 which was transferred to cash book in the subsequent year as on 01.04.2015 i.e. AY.2016-17 by passing book entry i.e. “Cash Book” A/c. Dr. of Rs.34,10,000/-, to “Sage custody” A/c. Cr. of Rs.34,10,000/-. Thus, the said amount of Rs.34,10,000/- cannot be said as the difference in the opening cash balance since the same was transferred to “cash book” from the “Safe custody” as on 01.04.2015 as is evident from the cash book for AY.2016-17. Thus, the opening cash on hand as on 01.04.2015 was Rs.2,30,459/- and after passing entry as on 01.04.2015 for amounting to Rs.34,10,000/- as mentioned above, the cash balance at the end of the day on 01.04.2015 is reflected at Rs.36,40,459/-. The Assessing Officer ought to have accepted the explanation of the assessee, however without proper verifying the details, added the amount of Rs.34,10,000/- treating as unexplained cash credit u/s 68 of the Act. It Page | 6 ITA.423/SRT/2023/AY.2016-17 Naynaba Ashoksinh Jadeja is cleared that on 01.04.2015, the assessee has passed an adjustment entry wherein the safe custody cash was transferred to cash in hand. I note that Assessing Officer has not rejected books of accounts of the assessee, therefore genuineness of the transactions should not be doubted. Apart from this, audited books of accounts of the assessee do not show any defect and did not contain any mistake, so far as the adjustment entry passed by the assessee, as on 01.04.2015 is concerned. Therefore by considering the balance sheet of previous years, I have observed that cash balance has been coming since from 01.04.2013, which has not been doubted by the Assessing Officer. 9. Therefore, I note that assessee was having cash balance of Rs.2,30,459/- and cash lying as ‘Safe Custody’ - shown under “Loans & Advances” amounting to Rs.34,10,000/-, as on 31-03-2015, which has been carried forward in the subsequent year i.e. on 01.04.2015. On-going through the cash book submitted, I observe that opening cash balance as on 01.04.2015 under the head “Cash in hand” was Rs.2,30,459/- only, which is the same figure as closing balance as on 31-03-2015 and as shown in return of Income filed for A.Y.2015-16. Then after, on 01.04.2015, an adjustment entry was passed for an amount of Rs.34,10,000/- by crediting “Safe custody” account lying under the head “Loans & Advances” and by debiting the “Cash on Hand” account. Thus, there is no difference in the opening balance of cash book as alleged considering the cash on hand of Rs.2,30,459/- and safe custody of Rs.34,10,000/- lying in the books of account of the assessee as in 31-03-2015 i.e. for A.Y.2015-16. Accordingly, the assessee was having closing cash balance of Rs.26,11,030/- as on 31- 03- 2016 after transferring the cash balance of Rs.34,10,000/- lying under the head “Safe Custody” by passing necessary adjustment entry Page | 7 ITA.423/SRT/2023/AY.2016-17 Naynaba Ashoksinh Jadeja as on 01-04-2015 as is evident from the details filed before the lower authorities. The assessee also submitted the source of generation of such amount of cash balance. Considering these facts and circumstances, I delete the addition of Rs.34,10,000/-. 10. In the result, the appeal filed by the assessee is allowed. Order is pronounced on 31/08/2023 in the open court. Sd/- (Dr. A.L. SAINI) ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 31/08/2023 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat