Manual cash book contains data related to cash withdrawals and non-durable additions to income tax: ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the manual cash book contained entries relating to cash withdrawals and disbursements of the business, which were duly recorded and reconciled to the accounts, as well as cash entries, withdrawals and disbursements on behalf of the taxpayer.

The bank of Anubhav Sharma (Judicial Member) And M. Balaganesh (accountant member) has noted that to compensate for the negative cash balance reflected in the manual cash book qua the transactions of the appellant, the disclosure of Rs. 50 lacs have been filed by the appellant in the Income Declaration Scheme, 2016 (IDS). Therefore, there is no possibility of making any addition in the hands of the appellant as the appellant would be entitled to telescopic benefits.

A search and seizure operation was conducted on May 29, 2018, along with a parallel search of M/s. Lion Manpower Solutions Pvt. Limited, of which the appellant was the director, and no incriminating material was found in the search room of the appellant. During the search of Lion Manpower, allegedly incriminating material was found on the basis of which a supplement was made to the contested assessment notice. The original return of income for AYs 2015–16 and 2016–17 was filed on 30 September 2015 and 30 September 2016 respectively and was processed under Section 143(1) and the time limit for issuing notice under Section 143 (2) had expired. The assessment was completed before the execution of the Article 132 search on May 29, 2018.

Following the search, the assessment procedure under Section 153A was initiated for both AYs, which was concluded after making additions under Section 69C on the basis of a manual cash book purporting to contain cash expenditure from unexplained sources found on the premises from Lion Manpower. .

However, on further appeal, the CIT(A) granted partial relief to the appellant and modified the order of the Assessing Officer by upholding the additions in part and treating the same as the advantage or benefit obtained by the Director of the Company.

The Assessing Officer submitted that CIT (A) erred by making an artificial distinction between the above statement on the ground that though the incriminating material was not found in the premises of the Assessing Officer, it was found in the premises of related buildings of the group were found. It was argued that there is no concept of a joint assessment of related entities that are part of a common search. The assessment of each person resulting from a common search, related or unrelated, must be carried out independently in accordance with the provisions of the law.

The department found that there was no evidence to show that the company’s office building and the director’s office were separate.

The tribunal found that the manual cash book contained entries relating to cash withdrawals and disbursements of the company, which were duly recorded and reconciled with the accounts, as well as cash entered, withdrawn and disbursed on behalf of the appellant. Thus, once CIT(A) has endorsed the findings of AO that on the basis of this manual cash book of the company, no substantial addition is required in the hands of the company and since the cash inflows and outflows appear to be from known sources and existing books, which have been considered final in the assessment of the company, then the same set of books of the company, including the manual cash book found at the company, cannot be considered as incriminating material for The purpose of Section 153A is to bring replenishment into the hands of the assessee as a searched person as the two AYs are completed assessments.

Counsel for the appellant: Gaurav Jain

Counsel for the defendant: Sunita Verma

Case Title: Bijender Singh Lohia vs JCIT (OSD)

Case number: ITAs No. 1528 and 1529/Del/2022

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