The Delhi Bench of Income Tax Appellate Tribunal recently ruled on a case concerning the treatment of manual cash books in tax assessments. The bench, comprising Anubhav Sharma (Judicial Member) and M. Balaganesh (Accountant Member), found that the manual cash book containing entries relevant to cash withdrawals and expenses of the company, reconciled with its official books of account, did not warrant any additional tax liability for the appellant.
The appellant disclosed Rs. 50 lakhs under the Income Declaration Scheme, 2016 (IDS), to offset a negative cash balance reflected in the manual cash book. Despite an investigation on May 29, 2018, which included scrutiny of M/s. Lion Manpower Solutions Pvt. Limited, of which the appellant was a director, no incriminating evidence was found on the appellant’s premises. However, alleged incriminating material was discovered on the premises of Lion Manpower.
The assessment for the relevant assessment years (AYs 2015–16 and 2016–17) had been concluded before the search operation under section 132 on May 29, 2018. Assessment proceedings under Section 153A were initiated post-search, leading to additions under section 69C based on entries in the manual cash book found at Lion Manpower’s premises.
On appeal, the CIT(A) partially upheld the assessing officer’s additions, considering them as benefits received by the director from the company. The appellant argued against this distinction, emphasizing that each entity’s assessment arising from a common search should be independently completed.
The department contended that there was no evidence to prove that the company’s office premises and the director’s office were separate.
The tribunal held that since the manual cash book was reconciled with the company’s official books and entries therein were from legitimate sources, no additional tax liability should be imposed on the appellant. The tribunal reasoned that since the assessments for the relevant years were already concluded, the entries in the manual cash book found during the search could not be considered incriminating material under Section 153A to justify additions in the appellant’s hands.
This ruling highlights the importance of substantiated evidence in tax assessments and emphasizes the need for independent assessments for entities involved in a common search operation. It provides clarity on the treatment of manual cash books and underscores the principles of fairness and justice in tax proceedings.
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