Addition u/s 68 on the premise that cash was deposited 16 days after receipt quashed by ITAT
In a recent judgment, the ITAT Delhi has quashed the addition u/s 68 for cash deposited in bank adopting an unreasonable approach that cash was deposited 16 days after the receipt from medical profession and that too without rejecting books of account.
ABCAUS Case Law Citation:
4258 (2024) (09) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition made under section 68 of the Income Tax Act, 1961 (the Act) by the Assessing Officer (AO) for alleged unexplained cash deposit in the bank account during demonetization period.
The appellant assessee was a doctor and during the year had started running a 50 bedded hospital. The income tax return for the relevant assessment year was selected for scrutiny and the Assessing Officer (AO) completed the assessment under section 143(3) of the Act by making an addition under section 68 of the Act for Rs.7,50,000 for alleged unexplained cash deposit in the bank account during demonetization period.
The total receipts of the hospital during the year were at Rs. 217.73 lakhs. Out of total receipts, cash receipts from hospital services viz. IPO, OPO, lab testing, ultrasound and other services during the year was at Rs. 152.75 lakhs and total payments at Rs.143.10 lakhs (including cash deposit of Rs. 91.73 lakhs with the banks during the year). The balance cash of Rs.10.79 lakhs was cash in hand at the close of the financial year. That the appellant has deposited a sum of Rs. 27 lakhs in the bank accounts as under:
| 10.11.2016 | Rs. 7,00,000 |
| 14.11.2016 | Rs. 12,50,000 |
| 24.11.2016 | Rs. 7,50,000 |
The AO had considered the cash deposits on 10.11.2016 and 14.11.2016 amounting to Rs.19.50 lakhs out of receipts from hospital and treated the amount of Rs. 7,50,000 deposited on 24.1 1.2016 as unexplained and added the same under section 68 of the Act. the assessment was accordingly completed under section 143(3) of the Act.
The AO also analyzed the same from the point of view of Human Probability Test also and held that the explanations offered by the appellant were not acceptable.
Upon assessee’s first appeal, CIT (Appeals) confirmed the addition.
The Tribunal observed that the assessee was running a nursing home. The total receipts of the hospital during the year were Rs. 217.73 lakhs. The books of account had not been rejected in this case. All cash deposits have been accepted from the hospital services of the nursing home.
The Tribunal further observed that as regards a deposit of Rs. 7,50,000/- an adverse inference had been taken that assessee deposited the same after 16 days, which was very unreasonable approach.
The Tribunal opined that when assessee had such a huge turnover and books of account had also not been rejected and no defect has been pointed out therein, adverse inference taken was not sustainable.
Accordingly, the Tribunal set aside the orders of the authorities below and decided the issue in favour of the assessee.
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