MEHER MIRACLES PVT LTD,MUMBAI V. ACIT, CIRCLE 15(2)(2), MUMBAI

ITA 316/MUM/2025

AI Insights

Meher Miracles Private Limited appealed against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre, which confirmed the addition of Rs. 13.21 lakhs as unexplained income during the demonetization period. The AO had initially added this amount as unexplained income under section 68 of the Income Tax Act, citing insufficient explanation of the source of cash deposits. The Tribunal, however, found that the company had provided adequate evidence through its audited books of account, showing that the deposits were made from cash withdrawals recorded in the books.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 32225 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA GAIKWAD
• Assessee Lawyers: GUNJAN KAKKAD
• Keywords: Set aside
• Section: 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “SMC” BENCH : MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA No. 316/Mum/2025 Assessment Year : 2017-18 Meher Miracles Private Limited, A701, Rustomjee Paramount, 18th Rd Khar West, Mumbai PAN : AAKCM0471A vs. ACIT, Circle-15(2)(2), 3rdFloor, Aayakar Bhavan, Maharshi Karve Road, Mumbai (Appellant) (Respondent) Assessee by : Shri Gunjan Kakkad Revenue by : Smt. Usha Gaikwad, Sr.DR Date of Hearing : 06-03-2025 Date of Pronouncement : 10-03-2025 ORDER PER B.R. BASKARAN, A.M : The assessee has filed this appeal challenging the order dt. 25-11-2024 passed by the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟] and it relates to AY. 2017-18. The only issue urged in this appeal is related to the addition of Rs.13.21 lakhs relating to cash deposits made into the bank account during demonetization period. 2. We heard the parties and perused the record.The AO noticed that the assessee has deposited cashto the tune of Rs. 13.21 lakhs into its bank account during demonetization period. The AO noticed that the assessee has not filed return of income and hence, the AO issued notice u/s.142(1) of the Act, asking the assessee to file the return of income. 2 ITA No.316/Mum/2025 However, the assessee filed return of income after a delay of more than eighteen months, declaring NIL income. 3. During the course of assessment proceedings, the AO issued summons to the assessee and in response there to one of the Directors, Mrs. Gitanjali Sinha appeared. The AO recorded a statement from her. With regard tosources in making deposit, it was submitted that they were made out of cash withdrawn from the bank earlier. The AO took the view that the assessee-company has failed to give any satisfactory explanation about the nature and source of cash deposits and accordingly he assessed the cash deposit of Rs. 13.21 lakhs as un-explained income of the assessee u/s. 68 of the Act. The Ld.CIT(A) also confirmed the same. 4. The Ld.AR submitted that the assessee is a Private Limited company and it is maintaining regular Books of Account and the cash deposits were made out of cash available in the Books of Account. He further submitted that the Books of Account have been audited under the Companies Act and no adverse features have been noticed by the auditors. The Ld.AR also submitted that the assessee has filed copies of Balance Sheet and Profit & Loss Account, signed by the Directors, but the AO has observed that those financial statements were not audited and were not signed by the Chartered Accountant. Hence, the AO has presumed that those statements are not reliable. The Ld.AR submitted that the view so taken by the AO is factually incorrect. The assessee‟s Books of Account were duly audited and have been signed by the Chartered Accountant. The Ld.AR submitted that the mistake has happened in the reply given to the AO on 17-09-2019; wherein it was inadvertently mentioned as copies of un-audited Balance Sheet and Profit & Loss Account were furnished; whereas what was furnished was audited Balance Sheet and Profit & Loss Account only. Accordingly, the Ld.AR submitted that there is no reason to suspect the Books of 3 ITA No.316/Mum/2025 Account and the impugned addition made out of the cash balance available in the Books of Account, is not justified. 5. The Ld D.R, on the contrary, supported the order passed by Ld CIT(A). 6. We heard rival contentions and perused the record. We notice that the assessee is a Private limited company and its accounts were audited. The copies of audited accounts are placed on record. We notice that the AO has observed that the financial statements were unsigned and undated and accordingly, he has refused to consider them. However, as submitted by the Ld.AR, the financial statements are very much dated, audited and signed by the directors as well as the auditor. Be that as it may, what is required to be examined is whether the claim of the assessee that the cash deposits were made out of cash balance available in the books of accounts is correct or not?. Hence, what is required to be examined is the books of accounts and not the financial statements. The assessee has furnished summary of cash book at page 142 of the paper book. A perusal of the same would show that the assessee has withdrawn from banks a sum of Rs.11,95,000/- in the month of April, 2016, Rs.70,500/-, Rs.45,000/- and Rs.55,000/- respectively in the months of June, 2016 and July, 2016 and October, 2016. Further, a sum of Rs.1,40,000/- was withdrawn in the month of November, 2016 before announcement of demonetization. The assessee has also furnished the details of disbursements made out of cash balance made month wise. Thus, we notice that the assessee has deposited impugned amount of cash out of the cash balance available with it only. When the deposits are made out of book balance, in our view, there is no necessity to disbelieve the sources, when the books of accounts and results declared therein are accepted. Accordingly, we are of the view that the tax authorities are not justified in making this addition. Accordingly, we set aside the order passed by the Ld.CIT(A) on 4 ITA No.316/Mum/2025 this issue and direct the AO to delete the addition of Rs.13.21 lakhs made by him. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 10-03-2025 Sd/- Sd/- [SANDEEP GOSAIN] [B.R. BASKARAN] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 10-03-2025 TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai "