Appeal allowed: Past withdrawals legit source for unexplained cash deposits

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 explain unexplained cash deposits in the bank account during the demonetization period for Assessment Year 2017-18. The decision underscored the importance of considering reasonable quantum of cash from past savings to justify cash deposits, aligning with a Karnataka High Court judgment that earlier withdrawals should be deemed available to explain subsequent deposits.

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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.

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