Case Law Details
Brief of the Case
In the case of Neeraj Murarka Vs. ITO the Hon’ble Kolkata ITAT held that the fact of cash withdrawals made by assessee, cash balance held by assessee has never been questioned and nor any fact to the contrary has been brought on record. There was sufficient cash balance in the hand of assessee to deposits the cash of Rs.8.60 lakh and that the amount of cash credit could not be included in the total income of the assessee because the inquiry was not properly made.
Facts of the Case
The assessee is an Individual. During the course of Assessment proceedings it was found that the assessee had deposited a sum of Rs. 1 lakh and Rs. 7.60 lakh on 07-03-2007 and 09-03-2007 respectively in Sarawati Co-Op Bank Ltd. The said Bank account was not appearing in the Balance Sheet of the Assessee as on 31-03-2007. The Statement submitted by the Bank showed a Balance of Rs. 1,211.53 in the said account. On being asked assessee as to why balance of 1211.53 held with Saraswat Co-op Bank as on 31.03.2007 was not shown in the balance sheet as on 31.03.2007 and assessee replied that he had written off balance amount of Rs.1211.53 as they have given the application for closing of said account and assessee was not sure of this meager amount back from the bank.
On detailed examination by AO the bank account of assessee held with Saraswat Co-Op Bank it was revealed that cash of Rs.1 lakh was deposited on 07.03.2007 and a cheque for Rs.1 lakh was issued to Sandeep Jajodia on 09.03.2007 and again cash of Rs.7.60 lakh was deposited and on the very same date a cheque was issued for the said amount to Sandeep Jajodia. On being enquiry made by AO for the source of cash amount of Rs.8.60 lakh (Rs.1 lakh + Rs.7.60 lakh) assessee’s reply was that said amount was deposited out of cash in hand balance held by assessee in his cash book maintained in his regular books of account. Assessee further submitted that the source of the said cash fund is out of cash withdrawn from his bank account on various dates.
The A.O. was not satisfied with the explanation given by the Assessee and treated the sum of Rs. 8.60 lakh (1 lakh + 7.60 lakh) and unexplained cash credit and undisclosed income and added the same to the Total Income of the Assessee.
Contention of the Assessee
Ld. Counsel for assessee filed Paper Book giving brief submissions, copy of cash book, from 01.04.2006 to 31.03.2007 Xerox copy of bank statement of Sarswat Co-op Bank together with separate typed copy of said bank statement for financial year 2006-07 as the Xerox copy of said bank statement was not fairly read out. The Ld. Counsel further submitted as under :
“8) The Assessing Officer has verified and satisfied with the transactions of the appellant in course of earning income from commodity trading of Rs.103676.23 in MCX Exchange through broker M/s Sandeep Jajodia having account payee crossed cheques deposit and withdrawals through banks Sarswat Co-op Bank Ltd. Malad Branch and Bank of Baroda, Malad Branch, Mumbai and has accepted the income from commodity trading of Rs.103676.23 on the one hand and has disbelieved source of deposit of Rs.100000/- and Rs. 760000/- in cash on 7.3.2007 and 9.03.2007 in Sarswat Co-op Bank Ltd., Malad Branch, Mumbai on the other hand solely on the ground of inadvertent mistake on the part of the appellant of not showing closing balance of Rs.1211.53 with the said Sarswat Co-op Bank Ltd. At the same time he is satisfied with the source of deposit of Rs.1960000/- out of total deposit of Rs.2820043/- in the said Sarswat Co-op Bank Ltd., which according to him is undisclosed bank account. The source of deposit of Rs.100000/- and Rs.760000/- in cash on 7.3.2007 and 9.03.2007 in Sarswat Co-op Bank Ltd., Malad Branch, Mumbai was fully explained through cash book and bank account with bank of Baroda and Sarswat Co-op Bank Ltd., Malad Branch, Mumbai……”
Contention of the Revenue
The Ld. DR of Department heavily relied on the orders of the lower authorities.
Held by CIT(A)
Ld. CIT(A) was not able to co-relate the cash deposits with the source of cash and therefore he confirmed the addition of Rs.8.60 lakh made by AO. Further, Ld. CIT(A) also noted that the details filed about the source of deposits which were claimed to have withdrawn from the bank account held by assessee were made in July 2007 whereas deposits were made in the month of March, 2007. As per Ld. CIT(A), this fact strengthened the view of cash remained unexplained and in view of the facts and circumstances of the case, Ld. CIT(A) found no infirmity in the order of AO he dismissed the appeal of assessee
Held by ITAT
ITAT held that for invocation of Section 68 of the Act proper inquiry is needed. The Section 68 empowers the Assessing Officer to make enquiry specifically to be satisfied regarding the cash credit. If he satisfied that these entries are not genuine, he has every right to add these amounts as “income from other source”. The satisfaction of the Assessing Officer is the basis of invocation of the powers u/s 68 of the Act and the satisfaction must be derived from relevant factors on the basis of proper inquiry. The inquiry envisaged u/s 68 of the Act within an enquiry which reasonable and just it has been held in the decision of Hon’ble Gauhati High Court in the case of Khandelwal Constructions v. CIT (1997) 227 ITR 900 (Gauhati) that the amount of cash credit could not be included in the total income of the assessee because the inquiry was not properly made.
The Hon’ble ITAT examined all the cash deposits and withdrawals made by the Assessee as presented in the paper book and concluded that During the course of assessment proceedings as well as appellate proceedings before Ld. CITT(A) this fact of cash withdrawals made by assessee, cash balance held by assessee has never been questioned and nor any fact to the contrary has been brought on record. There was sufficient cash balance in the hand of assessee to deposits the cash of Rs.8.60 lakh.
Thus, the Hon’ble ITAT deleted the addition made by the A.O. u/s 68 of the Act and the Assessee’s appeal is allowed.
