Cash withdrawals from bank accounts can be legally kept at home without Section 69A addition

ITAT Surat ruled in favor of assessee regarding addition under section 69A for cash balance from bank withdrawals. Lower authorities questioned why cash remained in hand for extended period despite having bank accounts. Assessee proved cash withdrawals through documents and cash book entries, with AO accepting the withdrawals occurred. ITAT held no legal restriction exists on keeping cash at home, and AO failed to provide adverse evidence that cash exceeded bank withdrawals. Addition was deleted as assessee adequately explained cash source.

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Issues Involved:
The primary issue in this case is whether the assessee was able to justify the source of the closing cash balance available with him, leading to the addition made by the Assessing Officer under section 68 of the Income Tax Act.

Assessment by Assessing Officer:
The Assessing Officer noted a significant increase in the cash-in-hand of the assessee from the previous year, raising concerns about the source of such funds. The assessee was asked to provide details regarding the cash balance, but the explanation provided was not accepted by the Assessing Officer. Consequently, an addition of Rs. 38,61,083/- was made as unexplained cash credit under section 68 in the assessment order.

Appeal before Ld. CIT(A):
The assessee, in the appeal before the Ld. CIT(A), contended that the conditions for the application of section 68 were not met as there was a clear explanation for the source of the cash balance. The assessee argued that the cash was withdrawn from bank accounts for specific purposes, such as the intended purchase of agricultural land, and provided supporting documentation to substantiate the claim.

Decision of Ld. CIT(A):
The Ld. CIT(A) agreed with the Assessing Officer regarding the unexplained nature of the cash balance but differed in the application of the relevant section. The Ld. CIT(A) upheld the addition under section 69A instead of section 68, thereby confirming the addition of Rs. 38,61,083/-. The assessee, still dissatisfied, proceeded to appeal before the Tribunal.

Tribunal's Decision:
After hearing arguments from both sides, the Tribunal found merit in the submissions made by the assessee. The Tribunal observed that the source of the cash balance was adequately explained by the assessee through bank withdrawals and intended transactions, despite the prolonged holding period of the cash. The Tribunal emphasized that there is no legal restriction on keeping cash at home and concluded that the assessing officer's doubts regarding the cash availability were unjustified. Consequently, the grounds of appeal raised by the assessee were allowed, and the appeal was upheld in favor of the assessee.

Final Verdict:
The Tribunal allowed the appeal of the assessee, overturning the addition made by the Assessing Officer and upheld by the Ld. CIT(A), based on the satisfactory explanation provided by the assessee regarding the source of the cash balance. The decision was pronounced on 13th November 2023 in open court.

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