DCIT Vs Atulah Contractors and Construction Pvt. Ltd. (ITAT Delhi)
ITAT Delhi held that addition under section 68 of the Income Tax Act towards unexplained cash deposits unjustified as source of cash deposit successfully demonstrated by the assessee.
Facts- In the post-demonetization period, the Police intercepted two vehicles carrying cash amounting to Rs. 2,22,76,000/- which was belonging to M/s Omaxe Ltd. The said cash was requisitioned u/s. 132A by the Income Tax Authority and a survey u/s. 133A was also conducted at the office premises M/s Omaxe Ltd, wherein certain documents were impounded. The AO has stated that these impounded pages contain noting’s of cash balances of various group companies belonging to the Omaxe Group, to which the assessee company also belongs. The AO asked the assessee for justification/ source of the excess cash so deposited after demonetization.
The AO, not accepting the explanation, made addition of Rs. 2,40,00,000 on account of unexplained cash deposits u/s. 68 of the Income Tax Act by observing that the assessee has failed to explain the source of cash deposited during demonetization period.
CIT(A) granted relief to the assessee.
Conclusion- Held that comparison and figures clearly show that the assessee was consistently maintaining huge cash balance as per his business prudence and there was huge cash withdrawals which are much higher than the amounts of cash deposited by the assessee to its bank account during pre & post demonetization period and we are unable to see any discrepancy defect or perversity therein.
Held that the assessee has successfully demonstrated source of cash deposit of Rs. 2,40,00,000/- to its bank account during demonetization period and hence not addition is called for.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been filed against the order of CIT(A)-31, New Delhi dated 06.07.2022 for A.Y. 2017-18.
2. The grounds raised by the revenue in ITA No. 2438/Del/2022 are as under:-
1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring the fact that the assessee company only submitted that the company was a construction contractor and needs cash in hand for making payment for wages etc. The assessee did not produce any documentary evidences of any payment t being made for wages etc.
2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring the fact that the assessee throughout during assessment proceedings even before appellate proceedings only submitted figures/data’s in order to establish the source of such cash deposits made by the assessee during assessment proceedings but no documentary evidences relating to the purposes of such cash in hand i.e. expenses such as wages etc was filed by the assessee, done in FY 2016-17, i f any, relating to the AY 2017-18 or in any of the earlier AY/AYs.`
3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring Section 68 of the Income-tax Act, 1961 which clearly speaks that the primarily burden of proof lies on the assessee in order to prove the genuineness o f the transactions which the assessee failed to do so.
4. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring the Provision of Section 103 of the Evidence Act which clearly states that the burden of proof is on the person who wishes the court to believe in the existence of a particular fact. In this scenario, Burden of proof will never be shifted to the Revenue, it lies on the assessee who is required to prove a fact. When we come within the ambit of Section 68 of the Income-tax Act, 1961, one and the most important limbs i.e. documentary evidences will always come into role automatically w.r.t any such claims made by the assessee during the assessment proceedings.
5. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring the impounded documents seized from the registered address of M/s Omaxe Limited as Annexure A-4 (Page No. 87 to 91 and 97-100) which brought into light the fact that the company M/s Atulah Contractors Construction (P) Ltd. was having Cash-in-hand as on 08.11.2016 was 1378181 (as per page nos. 87 to 91) while the same as on 08.11.2016 as per page no. 97-100 was 1298219
6. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring that there is no pattern of such huge cash deposits in the year previous to the relevant previous year.`
7. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring that the assessee only submitted that the impounded documents containing cash balance available at site offices maintained at the corporate headquarter for various exigencies but again the assessee did not produce any documentary evidences in order to establish its claim. It is not acceptable that such a going on concern i.e. company/flagship company does not maintain or keep record o f such details of cash along with its purposes for each of the company sites separately.
8. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring and did not discuss on the Cash in hand as per impounded documents in its whole order rather involved himself only in the commensuration of the data of the assessee for both the FYs.
9. Whether the order of the CIT(A) is perverse, erroneous and is not tenable on facts and in law.
3 . The ld. Senior DR submitted that the ld. CIT(A) has erred on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring the fact that the assessee company only submitted that the company was a construction contractor and needs cash in hand for making payment for wages etc. The assessee did not produce any documentary evidences of any payment being made for wages etc. it was also submitted that on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring the fact that the assessee throughout during assessment proceedings even before appellate proceedings only submitted figures/data’s in order to establish the source of such cash deposits made by the assessee during assessment proceedings but no documentary evidences relating to the purposes of such cash in hand i.e. expenses such as wages etc was filed by the assessee, done in FY 2016-17, if any, relating to the AY 2017-18 or in any of the earlier assessment years and has grossly erred in ignoring the provision of sec 68 of the Act which clearly provides that the primary burden of proof lies on the assessee in order to prove genuineness of transaction which the assessee failed to discharge.
4. The ld. Senior DR vehemently pointed out that on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring the Provision of Section 103 of the Evidence Act which clearly states that the burden of proof is on the person who wishes the court to believe in the existence of a particular fact. In this scenario, Burden of proof will never be shifted to the Revenue, it lies on the assessee who is required to prove a fact. When we come within the ambit of Section 68 of the Income-tax Act, 1961, one and the most important limbs i.e. documentary evidences will always come into role automatically w.r.t any such claims made by the assessee during the assessment proceedings. Harping on the factual mistakes committed by the ld. CIT(A) the ld. CIT(DR) submitted that on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring the impounded documents seized from the registered address of M/s Omaxe Limited as Annexure A-4 (Page No. 87 to 91 and 97-100) which brought into light the fact that the company M/s Atulah Contractors Construction (P) Ltd. was having Cash-in-hand as on 08.11.2016 was 1378181 (as per page nos. 87 to 91) while the same as on 08.11.2016 as per page no. 97-100 was 1298219.
5. The Senior DR also drawing our attention towards assessment as well as first appellate order submitted that on the facts and in the circumstances of the case, the Ld. CIT(A) erred in law & on facts, ignoring that the assessee only submitted that the impounded documents containing cash balance available at site offices maintained at the corporate headquarter for various exigencies but again the assessee did not produce any documentary evidences in order to establish its claim. It is not acceptable that such a going on concern i.e. company/flagship company does not maintain or keep record of such details of cash along with its purposes for each of the company sites separately and there was no pattern of such huge cash deposit in the preceding assessment year. The Senior DR also submitted that the ld. CIT(A) has ignored and did not discussed the issue of cash in hand as per impounded documents in its whole order rather only considered the data supplied by the assessee for granting relief to the assessee. Therefore impugned first appellate order may kindly be set aside by restoring that of the Assessing Officer.
6. Replying to the above, the ld. counsel of assessee drew our attention towards findings recorded by the ld. CIT(A) in para 5 to 5.3 of first appellate order and submitted that the cash deposited pre & post demonetization period was duly explained by the assessee and amount of cash available as on 08.11.2016 was also fully explained by the assessee. The ld. counsel submitted that the cash balance on the date of demonetization i.e. on 08.11.2016 was created and build up by opening cash balance as on 01.04.2016 and cash withdrawals from the bank account of assessee till 08.11.2016 which has not been disputed as the same also tallies with the cash balance as on 31.03.2016 as per return of income for AY 2016-17 filed before declaration of demonetization, and the same cash balance was brought forward as opening balance on 01.04.2016. The ld. counsel submitted that the ld. CIT(A) has considered stand of the Assessing Officer and explanation of assessee supported by plausible documentary evidence and thereafter deleted the addition by recording sustainable reasoning which requires no interference and thus appeal of revenue may kindly be dismissed.
7. On careful consideration of above rival contention first of all, from the assessment order we note that the Assessing Officer made addition u/s. 68 of the Act by observing that the assessee has failed to explain the source of cash deposited during demonetization period. The contention of Assessing Officer are precisely that the cash withdrawals by the assessee are not near to the dates of cash deposits and when the cash was withdrawal for wages payments & other purposes then there is no reason why such expenses were not incurred and a running concern could not have huge cash for long period. The Assessing Officer also alleged that the assessee has prepared cash book in such a way showing cash withdrawals and cash deposits during demonetization period which is after thought and self serving. He also alleged that comparative figure of earlier to preceding year are not matching with the cash deposit and there is no question of accepting cash generation through sales. We also noted that the flagship company M/s Omexe Ltd. has surrendered huge amount of unaccounted income but assessee has not disclose any such income.
8. The ld. CIT(A) granted relief to the assessee the following observations & finding:-
5. I have carefully considered the assessment order and submissions of the appellant. Ground nos. 1 to 3 of the appeal are related to the addition of Rs. 2,40,00,000/- on account of unexplained cash deposits. The brief facts of the case are that on 22.11.2016, in the post-demonetization period, the Police intercepted two vehicles carrying cash amounting to Rs. 2,22,76,000/- which was belonging to M/s Omaxe Ltd. The said cash was requisitioned us 132A by the Income Tax Authority and a survey us 133A was also conducted at the office premises M/s Omaxe Ltd, wherein certain documents were impounded as Annexure A-4 (Page No. 87 to 91 and 97 to 100). The AO has stated that these impounded pages contain notings of cash balances as on 08.11.2016 of various group companies belonging to the Omaxe Group, to which the assessee company also belongs. The AO has reproduced the said relevant pages of the impounded documents in the assessment order. From these impounded pages, the AO has noted that the cash balance available as on 08.11.2016 with the assessee company was Rs. 13,78,181/-, whereas the assessee had deposited cash amounting to Rs. 2,40,00,000/- post-demonetization. The AO asked the assessee for justification/ source of the excess cash so deposited after demonetization. In response, the assessee submitted that the said deposit had been made out of cash available as per cash book balance on 08.11.2016. It was also pointed out that the said cash balance had been built up through cash withdrawals from bank accounts of the assessee. The assessee has also furnished comparative charts for F.Y. 2015-16 and 2016-17 showing month-wise cash balances, withdrawals and deposits, in order to demonstrate that such withdrawals and deposits were a part of routine business exercise of the assessee even in the period prior to the demonetization. In support of the said charts, the assessee also submitted its cash books and bank account statements. The assessee also stated that it was engaged in the real estate business and needed to maintain sufficient cash balances for various exigencies at various sites. It was further brought to the knowledge of the AO that the impounded documents contain cash balances available at site offices of the assessee and did not incorporate the cash balances as per the main cash book maintained at the corporate headquarters. It was stated that the balances as per various cash books as on 08.11.2016 were as follows:
