2023 (3) TMI 755 - AT - Income Tax

Addition u/s 68 - cash deposits in the bank accounts maintained by the assessee during the demonetization period - Test of reasonableness of the explanation - HELD THAT:- Test of reasonableness of the explanation has to be examined in the context of nature of business and other financial dealings of the assessee and how the assessee has maintained documentation in that regard. There cannot be a uniform test which can be applied in each and every situation. Where there is no statutory mandate to get the books of accounts audited, insisting that the books of accounts or for that matter, the cash book is not audited and consequent cash flow statement is not reliable, we find that it is a case where the authorities have not been reasonable in their expectation rather than the case where the assessee has not provided a reasonable explanation.

Where the books of accounts, cash book and other documentation so exist and produced for verification, the authorities are well within their right and jurisdiction to examine the same and point out the defects and inaccuracies which may come to their notice. As far as non-reliance on books of accounts and other documentation so submitted by the assessee, we are of the considered view that the action of the lower authorities cannot be sustained.

Assessee has submitted copies of balance sheet and profit/loss account of M/s G K Resorts as well as copy of capital account in name of the assessee which is maintained in the books of M/s G K Resorts and we find that the entries therein demonstrate withdrawal of capital by the assessee and the explanation regarding receipt of cash by way of withdrawal from his capital account therefore deserve to be accepted.

Assessee has not just provided a reasonable explanation to explain the source of cash deposits but the said explanation has been adequately supported by adequate documentation and in the entirety of facts and circumstances of the case, the addition so sustained by the ld CIT(A) are hereby deleted - Decided in favour of assessee.