Cash deposits from earlier withdrawals not unexplained income when proper books maintained and sources established

ITAT Ahmedabad ruled in favor of the assessee regarding unexplained cash deposits. The AO treated cash deposits as unexplained income after the assessee failed to provide satisfactory explanation of sources. However, the assessee furnished cash books and bank books showing the deposits originated from earlier withdrawals from the same bank account. The tribunal held that while withdrawing and redepositing cash is unusual, it is not prohibited by law. The assessee discharged the burden under sections 68/69 of the Act by providing necessary details. The revenue failed to produce evidence that the deposited cash was used for other purposes or came from undisclosed sources. The addition was based on assumptions and presumptions, making it legally invalid.

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Issues Involved:
1. Addition of Rs. 46,98,90,920/- as unexplained cash deposit in the bank account.

Summary:

Issue 1: Addition of Rs. 46,98,90,920/- as unexplained cash deposit in the bank account

The assessee, a public company engaged in real estate, was selected for scrutiny to verify sources of cash deposit. The AO noticed significant cash withdrawals and deposits, leading to questions about the nature of these transactions. The assessee explained that the cash was withdrawn for land acquisition negotiations which were later canceled, resulting in redepositing the cash. The assessee claimed the negotiations were verbal, hence no documentary evidence was available.

The AO rejected this explanation, citing lack of evidence and referencing the Delhi High Court's decision in Shri Dinesh Kumar Jain vs. PCIT, where similar claims were dismissed due to insufficient substantiation. Consequently, the AO treated the cash deposits as unexplained income and made an addition of Rs. 46,98,90,920/- to the assessee's total income.

The CIT(A) upheld the AO's decision, emphasizing the need for cogent evidence to support the assessee's claims. The CIT(A) referenced the Supreme Court's decision in Roshan Di Hatti Vs. CIT, which supports making additions when the assessee fails to discharge the onus of proof.

Upon appeal, the ITAT scrutinized the materials and arguments presented. The ITAT noted that while the assessee's actions might appear unusual, there is no legal prohibition against such transactions. The ITAT emphasized that suspicion cannot replace evidence, as held by the Supreme Court in CIT vs. Daulat Ram Rawatmull. The ITAT found that the assessee had discharged its onus by providing necessary details, and the revenue failed to disprove the assessee's claims with tangible evidence. The ITAT also referenced similar cases where additions were deleted due to lack of evidence that the withdrawn cash was used elsewhere.

Ultimately, the ITAT concluded that the addition was based on assumptions and was not justified. The ITAT set aside the CIT(A)'s findings and directed the AO to delete the addition of Rs. 46,98,90,920/-, allowing the assessee's appeal.

Order pronounced in the Court on 16/11/2023 at Ahmedabad.

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