ITAT: Not Proves Unexplained Cash If Deposited via Company’s Bank Accounts During Notebandi

The cash deposited via bank accounts of companies at the time of the demonetization is not unexplained cash, the Lucknow bench of the Income Tax Appellate Tribunal (ITAT) stated.

Under Section 143(3) of the Income Tax Act, 1961 the taxpayer Shiva Goods Carrier Pvt. Ltd assessment order was passed in which the total income of the taxpayer was specified at Rs.81,80,860/- as against returned income of Rs.34,20,860/-. In the aforementioned assessment order, an addition of Rs.47,60,000/- was made under Section 68 of the Income Tax Act.

At the time of the assessment proceedings the assessing officer encountered that in the duration of the demonetization i.e. from 09/11/2016 till 30/12/2106, the taxpayer had deposited old 500 and 1000 banknotes to the tune of Rs. 2,82,60,000/- in his bank accounts.

All the cash that would get generated via the cash withdrawal through its bank accounts and the cash required through the company for doing the payments to the farmers, transporters, wages & other expenses. AO incurred an addition and treated the cash deposited at the time of demonetization as unexplained cash credit excluding acknowledging the taxpayer’s submissions.

The taxpayer dissatisfied with the order filed an appeal to the Commissioner of Income Tax (Appeals) who allotted the partial relief to the taxpayer. Hence the taxpayer filed another appeal to the tribunal. The taxpayer’s counsel Om Kumar stated that the taxpayer’s company does not incur any cash sale or cash receipt via its customers as a policy and that the only cash source for the taxpayer company was withdrawals from its bank accounts.

Additionally, all expenses incurred by the assessee company, whether paid in cash or through banking channels, are correctly recorded in the assessee company’s cash book.

In order to establish legal and explicable sources for the deposit of SBNs during the demonetization period as well as for expenses incurred by the assessee, the assessee already provided a copy of their cash book and a table of cash withdrawals to the assessing officer.

Harish Gidwani, the attorney for the revenue, sought to put aside the files of the respective Assessing Officers with the instruction to issue new orders in conformity with the law after giving the relevant assessees reasonable opportunity and following proper fact- and circumstance-verification.

The issue is been restored by the two members of Sudhanshu Srivastava, (Judicial Member) and Shri Anadee Nath Mishra, (Accountant Member) for filing the respective assessing officers with the directions to pass the de nono orders as per the law post furnishing the reasonable chance to the respective taxpayers and post due verification of the facts and situation.