Reporting cash balance in ITR is a statutory requirement and cannot be taken so lightly: ITAT

The crux of the contention of Ld. AR is that the assessee was having a cash- balance of Rs. 2,23,14,855/- as on 01.04.2008 / 31.03.2008 which had been brought uptill AY 2012-13 for making deposits. Regarding the basis of holding balance of Rs. 2,23,14,855/- as on 01.04.2008 / 31.03.2008, Ld. AR has made a limited submission that the assessee received a compensation of Rs. 72,68,378/- from Greater Noida Industrial Development Authority in the year 1998-99 which was credited in assessee’s bank account and thereafter the assessee made cash-withdrawals from the same bank account and the same too formed a part of the balance of Rs. 2,23,14,855/- as on 01.04.2008. In response to a query raised by Bench as to the justification of holding such a high cash-balance for several years, at least from 01.04.2008 to AY 2012-18 and rather to say from a date much prior to 01.04.2008, Ld. AR submitted that the assessee was in the habit of holding such a high magnitude of cash-balance with him, though it may not be a commendable practice. Ld. AR further submitted that there is no ceiling-limit prescribed in Income-tax Act law for holding cash-balance.

Ld. AR also contended that the revenue has completed scrutiny-assessment of assessee in AY 2009-10 wherein the cash-book was duly produced and the Ld. AO did not make any objection to the high cash-balance. Therefore, not only the habit of assessee of maintaining high cash-balance but also the factum of holding opening balance of Rs. 1,76,64,438/- as on 01.04.2011 is proven. On legal side, Ld. AR also made a submission that the books of account of AY 2012-13 under consideration were audited and had not been rejected by Ld. AO, therefore no adverse inference can be drawn against the assessee and the opening balance as on 01.04.2011 had to be accepted.

Ld. DR appearing on behalf of revenue is neither satisfied with the decision of Ld. CIT(A) nor with the pleadings made by Ld. AR. Firstly, Ld. DR raised a strong doubt against the holding of such a high cash balance at home, that too for several years and in spite of the fact that the assessee is maintaining several bank accounts. Raising objection on quality of entries in the cash-books, Ld. DR also argued that although the cash-books were produced before Ld. AO, they do not represent the realistic cash-balance. Regarding scrutiny-assessment having been done by department in AY 2009-10, Ld. DR submitted that the scrutiny assessment was done for AY addition made by Ld. AO must be upheld.

ITAT observed that the assessee has sometimes filed “Business-ITR” and sometimes filed “Non-Business ITR”. Further, the assessment-history of AY 2008-09 and earlier years is not available on record.

Importance of reporting of Cash Balance:

Under the provisions of income-tax law, the Govt. has prescribed different types of forms of ITR, which can be broadly classified, for our purposes, in two categories, viz. (i) “Business-ITR” i.e. the returns in which business income is declared; and (ii) “Non-Business ITR” i.e. the returns not containing business-income. In case of “Business-ITR”, again there are two positions, viz. (i) if the assessee is required to maintain books of account u/s 44AA, the assessee has obligation to file Balance-Sheet which necessarily includes “Cash-Balance”, and (ii) If an assessee is not required to maintain books of accounts as per section 44AA, even then section 139(9) mandates reporting “the amount of cash balance at the end of the previous year”. From this, we can conclude that “cash-balance” has to be mandatorily reported for a person engaged in business irrespective of whether he is required to maintain books of accounts or not. Even the prescribed forms of “Business-ITR” have suitable columns to furnish the details of “cash-balance”. This is a statutory requirement and cannot be taken so lightly.

Non-Reporting cannot be taken lightly:

Obviously, a person not engaged in business is not required to make reporting of cash-balance and that is the precise reason that “Non-business ITR” do not have any column for reporting of cash-balance. This law / procedure has been in statute for several years and nobody can dispute it. Now, it is in that context that the Ld. AO himself verified the Business-ITR of AY 2011-12 filed by assessee and found that the assessee had reported “Nil” cash-balance as on 31.03.2011, and on such perusal the Ld. AO concluded that the assessee was not having opening cash-balance of Rs. 1,76,64,438/- as on 01.04.2011 as claimed. To repeat, this is the precise reason due to which Ld. AO did not accept the claim of assessee. During hearing, Ld. AR submitted that the reporting of “Nil” cash balance was just a reporting- error, but the assessee was factually having cash-balance as claimed. We note that the ITR is a sacred document prescribed in law and reporting-error cannot be pleaded so lightly. But, however, even if we accept that it was a reporting-error on the part of assessee, the assessment-order does not show that it was so pleaded before Ld. AO. Had this been pointed out to Ld. AO, he would have perhaps dug the case-records of assessee in more detail, considered the pleading of assessee in accordance with law and taken an appropriate view in the matter, particularly whether there is a justification behind claim of reporting-error and even if it is so, whether it is acceptable to revenue authorities or not.

ITAT Order

Hence ITAT directed the Ld. AO to examine complete case-records of assessee; give a full opportunity to the assessee to submit explanation on “Nil” cash-balance including justification on reporting-error in ITR; and to look into the aspect whether the reporting-error of cash-balance in the ITRs was only in AY 2011-12 or other years as well and whether such error can be excused by revenue authorities.

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