2020 (7) TMI 626 - AT - Income Tax

Tribunal reduces unexplained cash deposits by considering cash withdrawals, rejects circuitous transactions claim.

Baidya Nath Dey Versus ITO, Ward 1 (3), Durgapur

The Tribunal upheld the addition of Rs. 15,13,000 for unexplained cash deposits in the assessee's bank accounts, reducing it to Rs. 7,38,000 after ... Unexplained cash deposits found in his bank accounts - HELD THAT:- There were cash withdrawals made by the assessee from his bank accounts during the year under consideration and since there was nothing to show that the said cash withdrawals were utilised by the assessee somewhere else, the same, can be treated as available to the assessee except to the extent that some of the said withdrawals were required to be used by the assessee for his personal and households expenses. Some of the payments made by the assessee by cheques as reflected in his bank accounts were towards the personal and households expenses and if the same are taken into consideration along with the other facts of the case including the quantum of salary income of the assessee, consider it fair and proper to treat the cash withdrawals made by the assessee from his bank accounts as utilised for personal and households expenses to the extent of ₹ 3,00,000/- i.e. ₹ 25,000/- p.m. It thus follows that the cash withdrawals made by the assessee during the year under consideration from his bank accounts to the extent of ₹ 7,75,000/- can reasonably be treated as available with the assessee to explain the cash deposits made by him in the bank accounts during the year under consideration.Sustain the addition of ₹ 15,13,000/- made by the AO and confirmed by the Ld. CIT(A) on account of unexplained cash deposits found to be made by the assessee in his bank accounts to the extent of ₹ 7,38,000/- and allow partly the assessee’s appeal. Appeal of the assessee is partly allowed. Issues:Addition of cash deposits as unexplainedAnalysis:The appeal was against the addition of Rs. 15,13,000 made by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)] on account of cash deposits found in the assessee's bank accounts. The AO issued a notice to the assessee based on information about cash deposits in his accounts. The assessee, a salaried individual, claimed the deposits were from past savings. The AO rejected this explanation, stating it was illogical to withdraw cash from one account and deposit it in another without a valid reason. The CIT(A) upheld the addition, noting no evidence of circuitous transactions between the accounts. The Tribunal considered the cash withdrawals made by the assessee during the year, totaling Rs. 10,75,000, and concluded that a portion of this amount was available to explain the cash deposits. The Tribunal sustained the addition of Rs. 15,13,000 but allowed the appeal partly, reducing the addition to Rs. 7,38,000.The CIT(A) rejected the assessee's claim of circuitous transactions between bank accounts, finding no evidence to support it. The CIT(A) analyzed the transactions in the bank accounts with State Bank of India and Allahabad Bank, concluding that there was no interrelation between withdrawals and deposits in the accounts. The CIT(A) highlighted that the appellant failed to provide evidence that cash withdrawn from one account was actually deposited in the other. The CIT(A) emphasized that peak credits were not applicable in this case as there were no instances of multiple withdrawals and redeposits or inter-bank transfers. The Tribunal concurred with the CIT(A)'s findings and upheld the addition of Rs. 15,13,000.The Tribunal considered the cash withdrawals made by the assessee during the year from all three bank accounts. It noted withdrawals totaling Rs. 10,75,000 and reasoned that a portion of this amount was available to explain the cash deposits. After considering the personal and household expenses paid by the assessee through cheques, the Tribunal determined that Rs. 7,75,000 of the withdrawals could be treated as available to explain the cash deposits. Consequently, the Tribunal sustained the addition of Rs. 15,13,000 but allowed the appeal partly, reducing the addition to Rs. 7,38,000.