2022 (8) TMI 1406 - AT - Income Tax

Appeal allowed: Past withdrawals legit source for unexplained cash deposits

Shri. Girigowda Dasegowda, Bengaluru Versus ITO, Ward-2 [2] [8], Bengaluru

The Tribunal allowed the appeal, setting aside the CIT(A)'s order and emphasizing the acceptance of past withdrawals as a legitimate source of deposit to ... Unexplained money deposited in bank account u/s 69A - source of cash deposited in the loan account unexplained - plea of the assessee that earlier cash withdrawals from the two bank accounts are the source of funds for the cash deposit made in the bank account during the previous year - HELD THAT:- As in the case of Smt. P. Padmavathy [2010 (10) TMI 1154 - KARNATAKA HIGH COURT] clearly laid down that earlier withdrawals of cash from Bank account have to be accepted as available to an assessee to explain a later deposit as source. It was not open to the Revenue to contend that the assessee has to explain as to how the cash withdrawn earlier was utilized by an assessee and was still available with the assessee. The decisions cited by the learned DR are contrary to the law laid down by the Hon’ble Karnataka High Court [2010 (10) TMI 1154 - KARNATAKA HIGH COURT] and therefore not binding. Therefore, hold the past withdrawals as claimed by the assessee from 2013 should be considered as being available to the assessee to explain the source of deposit. A reasonable quantum of cash available out of past savings should also be considered as being available to the assessee to explain the source of cash deposited in the bank account. Appeal of the assessee is allowed for statistical purpose. Issues:Appeal against order of National Faceless Appeal Centre related to Assessment Year 2017-18 - Unexplained money deposited in bank account under section 69A of the Income Tax Act, 1961 - Confirmation of AO's order by CIT(A) - Acceptance of past withdrawals as source of deposit.Analysis:1. The appeal was filed by an individual assessee against the order of National Faceless Appeal Centre concerning the Assessment Year 2017-18. The issue revolved around unexplained cash deposits totaling Rs. 23,28,000/- in the assessee's bank account during the demonetization period. The Assessing Officer (AO) added this amount as unexplained money under section 69A of the Income Tax Act, 1961.2. The assessee explained that the cash deposits were sourced from earlier withdrawals from the same bank accounts, including pension, bank interest, PF, and gratuity. However, the AO and CIT(A) disbelieved this explanation due to lack of documentary evidence supporting the withdrawals and subsequent deposits. The CIT(A) emphasized the absence of substantial withdrawals before the demonetization period, leading to the confirmation of the AO's order.3. The assessee, relying on withdrawals from 2013, argued that these past withdrawals should be considered as available to explain the source of the cash deposits. The learned Counsel for the assessee cited a Karnataka High Court judgment emphasizing that earlier withdrawals should be accepted as available to the assessee to explain later deposits. The Tribunal, in line with the High Court's decision, held that past withdrawals from 2013 should be considered available to explain the source of the deposit.4. In contrast, the Revenue's argument, based on ITAT decisions, contended that the availability of earlier cash withdrawals for subsequent deposits must be established by the assessee. However, the Tribunal rejected this argument, stating that the High Court's ruling superseded these decisions. The Tribunal remanded the case to the AO to reevaluate the issue considering the past withdrawals as a valid source of deposit.5. Ultimately, the Tribunal allowed the appeal for statistical purposes, setting aside the CIT(A)'s order and emphasizing the acceptance of past withdrawals as a legitimate source of deposit. The decision highlighted the importance of considering reasonable quantum of cash from past savings to explain cash deposits, as per the High Court's directive.This detailed analysis of the judgment highlights the key issues, arguments presented, legal precedents cited, and the Tribunal's decision, providing a comprehensive understanding of the case.