Krishna Gears Private Limited Vs ITO (ITAT Delhi)
No Return for Earlier Year No Ground to Reject Books/Cash balance- Cash Deposits Explained from Carried Forward Cash-in-Hand – Tribunal Quashes Unexplained Cash Addition
Delhi Tribunal deleted the addition of ₹1.34 crore made as unexplained cash credit & deposit, holding that cash-in-hand duly reflected in audited books cannot be rejected merely because the return for the preceding year was not filed.
Assessee, engaged in manufacturing of industrial gearboxes, had deposited ₹82.76 lakh in cash during the year & explained that the deposits were from old cash withdrawals & accumulated balance as per its books, showing cash-in-hand of ₹75.29 lakh as on 31.03.2016. AO, however, treated the difference between deposits & withdrawals (₹51.14 lakh) & the opening cash balance of ₹77.46 lakh as unexplained, making a total addition of ₹1.34 crore u/s 68 & 69A. He also rejected the opening balance as “afterthought” since the company hadn’t filed return for AY 2015-16.
CIT(A) upheld the additions, alleging lack of documentary proof.
Tribunal observed that Assessee had maintained proper audited books of account & the cash-in-hand was duly recorded. Merely because the return of the previous year was not filed, AO could not disregard the company’s books for the current year. Tribunal emphasized that cash-in-hand once recorded & carried forward forms a valid source & AO could not make addition based on mere suspicion or presumption. If any irregularity existed for the prior year, Department could take remedial action separately, but not treat the opening balance as unexplained for the current year.
