In ITA No.270/RJT/2019 -ITAT- Positive cash balance cannot be basis for treating cash deposits as unexplained cash credit under Section 68 of the Income Tax Act, rules ITAT (Rajkot)
Members Annapurna Gupta (Accountant) & Madhumita Roy (Judicial) [11-07-2023]

Read Order: Vishwajit N. Mashru v. The Income Tax Officer Ward-1(2)(3) Rajkot

Chahat Varma

New Delhi, July 19, 2023: The Rajkot Bench of the Income Tax Appellate Tribunal has held that a positive cash balance represents surplus cash available and cannot by any stretch of imagination or logic be the basis for treating cash deposited in the bank account as unexplained.

In the present case, the assessee was aggrieved by an addition made to his income on account of alleged unexplained cash deposits in bank. The assessee argued that the addition made by the assessing officer (AO) was based on the peak cash balance from the various bank accounts of the assessee. However, the assessee contended that this peak balance was a positive cash balance, and not on account of negative cash balance.

The bench of Annapurna Gupta (Accountant) and Madhumita Roy (Judicial) agreed with the assessee's contention, and held that it was only the peak of the negative cash balance which reflects the shortage of cash available, which can be added as unexplained cash deposited in the bank. In view of the undisputed fact that the addition made in the present case was of the positive peak of cash balance available with the assessee, the bench held that there was no case for making addition of the same as unexplained cash credit under Section 68 of the Income Tax Act. The addition so made was, therefore, directed to be deleted.