Deposits made from cash available in the books of accounts cannot be treated as unexplained: ITAT

Deposits made from cash available in the books of accounts cannot be treated as unexplained: ITAT

CA Ayushi Goyal | May 24, 2022 | Views 11259

Deposits made from cash available in the books of accounts cannot be treated as unexplained: ITAT

Deposits made from cash available in the books of accounts cannot be treated as unexplained: ITAT

The assessee is a transport contractor. The AO noticed that the assessee has deposited Rs.2,32,00,000/- in its bank account on various dates. The assessee explained that the above said deposits have been made out of collections made on running of buses and also out of cash withdrawn from the bank. The AO noticed that the aggregate amount of collections made by the assessee from April, 2013 to November, 2013 was 191.95 lakhs. The opening balance as on the beginning of the year stood only at Rs.1.69 lakhs. Hence both these amounts are lesser than the number of deposits, referred above. The AO further noticed that the assessee was carrying huge cash balance at the end of each of the month. The AO also noticed that the assessee has withdrawn cash to the extent of Rs.8.93 Crores from the bank during the year under consideration, while the total amount of collections was Rs.4.88 Crores only. Hence the AO took the view that the assessee has withdrawn excess amount for using it for non-business purposes. Further, the assessee has also incurred expenses to the tune of Rs.4.66 Crores. The AO also noticed that the withdrawals have made from the bank by the person named Mr. Imran Basha and the assessee has not explained its business connection with the above said person.

Hence, the AO took the view that the explanations given by the assessee are contradictory. Accordingly, he took the view that the deposits of Rs.2.32 Crores stand unexplained. Accordingly, he assessed the same as income of the assessee.

In the appellate proceedings, the learned CIT(A) directed the AO to estimate income from deposits @ 10% and delete the balance amount of addition. Aggrieved, assessee filed an appeal before the tribunal.

ITAT observed that both the tax authorities have not examined the books of accounts of the assessee in order to verify the contentions that the impugned bank deposits have been made out of balance available in the books of accounts. Further, noticed that the AO has made abstract analysis of certain transactions and thus, disbelieved the explanations of the assessee without examining the books of accounts. The Ld CIT(A), however, proceeded to close the issue by estimating some income from the deposits. It is normal presumption that, if the deposits have been made from the cash balance available in the books of accounts, then the sources of the cash would stand explained and hence, there is no necessity to treat it as unexplained deposits warranting addition. However, if the books of accounts have been manipulated to bring the cash balance in books, then it is the duty of the AO to locate such manipulations and take a view thereon in accordance with law. Therefore, ITAT set aside the order passed by the learned CIT(A) and restore all the issues to the file of the AO for examining it afresh.

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