Ratilal Manubhai Dhanani Vs ITO (ITAT Rajkot)
Old Cash, New Tax? ITAT Deletes ₹33.33 Lakh Addition of Opening Cash Balance
Opening Cash Cannot Simply Become Current-Year Income
The Rajkot Tribunal deleted an addition of ₹33,32,677, holding that an opening cash balance originating in earlier years could not be treated as income of the assessment year under consideration. The Tribunal also found that the Assessing Officer had rejected the assessee’s explanation without establishing that his cash flow statement was incorrect or bringing evidence to contradict the supporting agricultural records.
The decision rests on both the evidence explaining availability of cash and the year to which that cash belonged. The mere omission of cash-in-hand particulars in earlier returns did not justify treating accumulated funds as fresh income in the year of investment.
Agricultural Savings Used to Purchase Land
The assessee was an individual engaged in agriculture and miscellaneous construction work on a labour basis. For Assessment Year 2015-16, he filed his return declaring total income of ₹2,59,540, besides agricultural income. His case was selected for limited scrutiny concerning the purchase of property.
During Financial Year 2014-15, the assessee purchased two parcels of land near Surat along with two other co-owners. His share in each property was one-third. According to the explanation recorded in the order, the total investment attributable to his share was ₹35,91,314, comprising ₹16,50,000 paid through cheques and ₹19,41,314 paid in cash.
