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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This appeal arises from order u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), passed by Ld. CIT(A)-NFAC, Delhi. In this case, the facts are that the assessee is proprietor of one M/s S.K. Textile Mills, which is engaged in retail trading of cloth. The Ld. AO noticed that there were large deposits of cash during the demonetization period and after due enquiry an amount of Rs.1,98,00,000/- was added u/s 68 of the Act. This amount represented the demonetized currency notes out a total cash deposit during the period of Rs.2,10,99,588/-.
The assessee approached the Ld. CIT(A), where considerable documents were presented but he could not succeed on account of the fact that the cash deposit was substantial and allegedly not in consonance with the business of the assessee or even the books of accounts maintained by him. The Ld. CIT(A) has emphasized on the fact that the assessee presented an explanation for keeping huge amounts of cash with him on the ground that he was fearful of seizure of his bank to say, the Ld. CIT(A) disbelieved the assessee’s contention and confirmed the impugned addition.
The aggrieved assessee has approached the ITAT and has challenged the action of the authorities below.
Before us the Ld. AR argued with the help of a voluminous paper book running into 1500 pages and took pains to point out that not only was the assessee maintaining huge cash balances prior to and later than the demonetization period but was also maintaining books of accounts, including cash book, which was duly presented before the authorities below. The Ld. AR pointed out that on 31.10.2016 the cash balance was Rs 5,87,75,507.25 [page 378 of the Paper Book]. It was further pointed out that on 30.09.2016 again the cash balance was a high figure of Rs.5,24,35,039.25. It was further argued that even around 30.11.2016 the cash balance was around 8,06,38,987.25 [page 384 of the Paper Book]. It was further argued that the authorities below had disregarded the assessee’s contention and had made the impugned addition disregarding the fact that there was substantial cash in hand with the assessee and out of a total deposit of Rs.2,10,99,588/-, only the demonetized currency was chosen for making the impugned addition. The Ld. AR also informed the reason why such heavy amounts have been maintained by the assessee.
The Ld. DR relying on the orders of the authorities below stated that the surrounding facts and circumstances were suspicious at the best.
We have carefully considered the rival submissions and have gone through the records before us. It is seen that this is a clear case where the assessee has habitually maintained substantial cash balances, significantly more than the impugned amount and there is no doubt that the impugned deposits have been made out of such cash in hand, which is duly reflected in the cash book presented before us. Also, the Ld. AO has only added the amount representing the demonetized currency and has considered as explained other cash deposits during the period. Accordingly, there is no hesitation in holding that no addition u/s 68 of the Act is possible as has been done by the Ld. AO. We direct the deletion of the impugned addition.
In the result, appeal is allowed.