Shri Deepak Gupta, Jalandhar V. ITO, W-1, , Patiala

ITA 446/CHANDI/2019

AI Insights

This case involves an appeal by Shri Deepak Gupta against the order of the ld. CIT(A), Patiala, which sustained an addition of Rs.31,38,050/- concerning cash deposits in his bank account for the Assessment Year 2009-10. The assessee initially faced a larger addition of Rs.60,23,050/- which was later partly relieved by the CIT(A). The Tribunal examined the cash flow statements and bank statements provided by the assessee and noted discrepancies in the consideration of the cash flow statement for the previous financial year 2007-08. The Tribunal found merit in the assessee's arguments regarding the non-maintenance of books of account under Section 44AF of the Income Tax Act, as the assessee was engaged in a retail stationery business with limited turnover.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133723 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-01-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 44AB

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,च瀃डीगढ़ 瀈यायपीठ च瀃डीगढ़ 瀈यायपीठच瀃डीगढ़ 瀈यायपीठ च瀃डीगढ़ 瀈यायपीठ , च瀃डीगढ़ च瀃डीगढ़च瀃डीगढ़ च瀃डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘A CHANDIGARH BEFORE: SHRI A.D.JAIN, VICE PRESIDENT AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर आयकरआयकर आयकर अपील अपीलअपील अपील सं संसं सं./ ITA No. 446/CHD/2019 Assessment Year : 2009-10 Shri Deepak Gupta, C/o Sahil Publication, Tanda Phatak, Fatehpura, Jalandhar. बना म VS The ITO, Ward 1, Patiala. 瀡थायी लेखा सं./PAN /TAN No: AFDPG0453K अपीलाथ牸/Appellant 灹瀄यथ牸/Respondent िनधा榁琇रती क琉 ओर से/Assessee by : Shri Vibhor Garg, C.A. राज瀡व क琉 ओर से/ Revenue by : Smt. Amanpreet Kaur, Sr.DR तारीख/Date of Hearing : 18.01.2023 उदघोषणा क琉 तारीख/Date of Pronouncement : 24.01.2023 आदेश आदेशआदेश आदेश/ORDER PER VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A), Patiala dated 31.10.2018 pertaining to Assessment Year 2009-10 wherein the limited issue raised by the assessee relates to sustenance of addition of Rs.31,38,050/- in respect of cash deposits in his bank account. 2. At the outset, it is noted that there is delay in filing the present appeal. After considering the arguments of both sides and considering the affidavits placed on record, we find that the assessee has a reasonable cause and there was no malafide, the ITA 446 /CHD/2019 A.Y. 2009-10 Page 2 of 7 delay so happened in filing the present appeal is hereby condoned and the appeal is admitted for adjudication. 3. During the course of hearing, the ld. AR submitted that the assessee filed his return of income showing income of Rs.2,44,150/- u/s 44AF of the Act. Thereafter, the case was selected for scrutiny and the AO passed the best assessment u/s 144 read with 143(3) and made an addition of Rs.60,23,050/- on account of cash deposits in the assessee's bank account. 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and sought permission to file additional evidence under Rule 46A which was thereafter sent to the AO seeking his comments and on receipt of the Remand Report and the comments submitted by the assessee, the ld. CIT(A) has given part relief and has sustained the addition amounting to Rs.31,38,050/- and against it, the assessee is in appeal before this Tribunal. 5. In this regard, our reference was drawn to the findings of the ld. CIT(A) which read as under : “I have carefully perused the submissions of the Ld AR the findings and the counter comments of the Ld. AO and contextualized these to the facts of the case. The appellant has sought to explain the cash deposits through a cash flow statement and suggesting that the deposits are explained through the withdrawals. The appellant has further stated that the appellant was not maintaining any books of account given the failing business and limited turnover. The Ld. AO has, on the other hand, stated that the appellant has not produced any books of account making it impossible to link the business ITA 446 /CHD/2019 A.Y. 2009-10 Page 3 of 7 accruals to the cash flow statement. Further the appellant has given no source for the cash in hand of Rs.24,33,000/-. The Ld AR has submitted that cash flow statement of the earlier year has been produced before the Ld AO; the Ld AO makes no mention of the cash flow statement of the earlier year; the Ld AR has filed bank statements of the earlier Financial year 2007-08 and a cash flow statement. However, the appellant has not filed any return of income for the A.Y. 2008-09 relevant to the Previous Year 2007-08, claiming that he had little business and no taxable income. That he retained a cash balance in hand on Rs. 24,33,000/- therefore contradicts his other submissions. Thus the credibility of the cash in hand of Rs. 24,33,000/- cannot be said to have been established. As regards the Previous Year relevant to the AY of the impugned order, the Ld AO has not produced any evidence to establish that the cash withdrawn from the bank accounts during the previous year 2008-09 was spent / used for any other purpose; further I have examined the cash flow statement for FY 2008-09 and there are only two entries claimed to be linked with the business of the appellant as under: 12.10.2008 Receipt from sale of books and Misc debtors 7,50,000 10.02.2008 Payment of Misc Creditors Purchases & Expenses 6,00,000 In the absence of books of account, if these entries were to be treated as mere cash inflow and outflow; the peak unaccounted balance in the cash flow for the year 2008-09 comes to Rs. 31,38,050/- ( not accepting the appellant's submission regarding the cash in hand). The Ld AO is directed to restrict the addition to Rs. 31,38,050/-. Thus ordered. The appellant partly succeeds on this ground of appeal.” 6. It was submitted by the ld AR that on a perusal of the aforesaid findings of the ld. CIT(A), it was submitted that it is a fact that the Cash Flow Statement for Financial Year 2007-08 as well as 2008-09 as well as the Cash Flow Summary for both the years were duly submitted before the AO during the course of remand proceedings and in this regard, our reference was drawn to the Cash Flow Statements which are placed in assessee's Paper Book at pages 1-3. Further our reference was drawn to the bank statements of the assessee basis which the withdrawals and ITA 446 /CHD/2019 A.Y. 2009-10 Page 4 of 7 deposits from the said bank account which find mention in the Cash Flow Statements have been disclosed. Regarding non maintenance of books of account, it was submitted that it is an admitted fact that the assessee is into the retail stationery business and is not required to maintain the books of account and has filed his return of income u/s 44AF of the Act. It was submitted that even for non-maintenance of books of account, the penalty proceedings u/s 271A were initiated by the AO which has since been dismissed by the ld. CIT(A) vide his order dated 30.11.2018 wherein the ld. CIT(A) has recorded his finding stating that the assessee's case is covered u/s 44AF(1) of the Act and therefore, the provisions of Section 44AA and 44AB are not applicable to the assessee and the penalty proceedings were quashed. It was submitted, that the said order has been passed by the same ld CIT(A) who has passed the impugned order and therefore, as far as the findings of non-maintenance of books of account, the same cannot be sustained given the fact that the assessee was not under any obligation to maintain books of account. Further regarding the opening cash in hand, it was submitted that in absence of books of account, the Cash Flow Statement should be taken into consideration and through the Cash Flow Statement, the assessee has demonstrated the availability of cash in hand and in absence of any adverse finding ITA 446 /CHD/2019 A.Y. 2009-10 Page 5 of 7 recorded by the lower authority, the same should be admitted and necessary relief be provided to the assessee. 7. Per contra, the ld. DR has relied on the order of the lower authorities. 8. We have heard the rival contentions and purused the material available on record. The assessee has filed his return of income showing income of Rs.2,44,150/- u/s 44AF of the Act and in view of the same, it is an admitted position that the assessee is not statutorily required to maintain regular books of accounts. At the same time, where there are cash deposits so made in the assessee’s bank account, the onus is on the assessee to explain the same which the assessee sought to discharge through the support of cash flow statement. In absence of regular books of accounts, we find that cash flow statement with appropriate explanation can act as a reasonable basis to demonstrate the deposits in the bank account. In the instant case, the ld CIT(A) has thus rightly taken cognizance of current year cash flow statement and considered the explanation of the assessee and has determined the peak cash balance of Rs 31,38,050/-and the addition to that extent has been sustained and the remaining addition of Rs 28,85,000/- has been directed to be deleted. However, while doing so, cash flow statement for the previous financial year 2007-08 and availability of opening cash in hand ITA 446 /CHD/2019 A.Y. 2009-10 Page 6 of 7 of Rs 24,33,000/- at the beginning of current financial year 2008-09 has not been considered. We find that there is no justifiable basis in not considering the cash flow statement for the previous financial year 2007-08 where cash flow statement for the current financial year has been considered by the ld CIT(A). As submitted by the ld AR, the withdrawals and deposits are supported by the assessee’s bank account statements which are available on record. Therefore, we set-aside the matter to the file of the AO for the limited purposes of examining the cash flow statement for the previous financial year 2007-08 and the related explanation of the assessee in order to determine cash-in-hand at the beginning of the current financial year. The AO is also directed to consider and take into consideration the cash-in-hand so determined at the beginning of the year to re-determine the peak cash balance during the year, which has been currently determined and stood at Rs 31,38,050/-, and peak cash balance so finally determined be brought to tax. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 24 th January, 2023. Sd/- Sd/- (A.D.JAIN ) (VIKRAM SINGH YADAV) VICE PRESIDENT ACCOUNTANTMEMBER “Poonam” ITA 446 /CHD/2019 A.Y. 2009-10 Page 7 of 7 आदेश क琉 灹ितिलिप अ灡ेिषत/ Copy of the order forwarded to : 1. अपीलाथ牸/ The Appellant 2. 灹瀄यथ牸/ The Respondent 3. आयकर आयु猴/ CIT 4. आयकर आयु猴 (अपील)/ The CIT(A) 5. िवभागीय 灹ितिनिध, आयकर अपीलीय आिधकरण, च瀃डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड榁 फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar