Employee working in Govt department for a long period of time, cannot be presumed to not having any cash in hand – ITAT deleted addition for unexplained opening cash in hand as per cash flow statement
ABCAUS Case Law Citation:
ABCAUS 2548 (2018) 09 ITAT
Govt employee cannot be presumed not having any cash in hand
A search action u/s 32 of Income Tax Act, 1961 (the Act) was carried out by the Income Tax Department in the group. The premises of the appellant assessee was also searched and some cash was recovered.
The Assessing Office (AO) issued notice u/s 153A of the Act to the assessee. In response thereto, the assessee stated that the return filed originally may be treated as the return filed in response to the notice u/s 153A of the Act.
During the assessment proceedings u/s 153A of the Act, the assessee submitted a cash flow statement covering all the five assessment year concerned. The opening cash balance was taken at Rs. 1,00,000/-.
However the AO did not accept the cash flow statement furnished by the assessee and proceeded to make addition of Rs.1 lakh.
The AO opined that during the relevant time, the assessee had bank accounts to keep any extra cash if any available with him in the bank accounts. In fact the assessee seemed to be hand to mouth as the cash balance in the bank account was never substantial. Further, according to the AO the sources of income of the assessee around the relevant time did not justify the cash balance of Rs.1,00,000/-
Therefore, the AO held that the cash flow statement submitted by the assessee was nothing but a self serving document and therefore he rejected it.
The AO framed the assessment u/s 153A r.w.s. 153(3) of the Act by treating the opening cash balance of Rs. 1,00,000/- with the assessee as unexplained and added ot to the total income of the assessee for the relevant AY. Penalty proceedings u/s 271(1)(c) were also initiated for furnishing inaccurate particulars of the income.
CIT(A), who also sustained the addition.
Before the Tribunal, it was argued that the AO and the CIT(A) failed to appreciate the facts in right perspective.
It was submitted that the addition sustained was not made on the basis of any incriminating material. It was merely on the basis of not accepting the cash flow statement.
It was contended that the assessee was a Government employee and it could not be in iota of imagination that he was not saving any amount.
The Tribunal observed that as per the findings recorded by the AO, it was clear that the addition was more on presumption than on any incriminating material.
The Tribunal opined that when it was undisputed fact that the assessee had been working in a Government department for a long period of time, therefore, it could not be presumed that he was not having any cash on hand.
The Tribunal held that Rs. 1 lakh as claimed by the assessee was reasonable as a cash in hand. Accordingly, the ground of the assessee was allowed.