Assessee successfully explains bank deposits through earlier withdrawals during demonetization, addition of Rs. 3.96 lakhs deleted

ITAT Bangalore allowed the assessee's appeal regarding addition of Rs. 3.96 lakhs for unexplained bank deposits. The assessee demonstrated that they had withdrawn Rs. 13,72,500 from bank accounts during 2015-16 and 2016-17, of which Rs. 6.46 lakhs was redeposited during demonetization. The AO arbitrarily considered only Rs. 2.5 lakhs as available for redeposit without material evidence. ITAT held that absent proof of how the balance withdrawal amount was spent, the assessee adequately explained the source through earlier withdrawals, and deleted the addition.

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Issues involved:
The issues involved in this case include the correctness of additions to the returned income, the arbitrary observations made by the CIT (A), the acceptance of the Assessing Officer's version over the Appellant's submissions, and the delay in filing the appeal before the Tribunal.

Additions to Returned Income:
The appellant, a salaried employee, had cash deposits during the demonetization period. The Assessing Officer accepted some explanations but added Rs. 3,96,000 as unexplained money. The CIT (A) confirmed this disallowance. However, the Tribunal found that the AO did not provide evidence that the appellant had only Rs. 2.5 lakhs available for redeposit. Considering the earlier withdrawals, the Tribunal held that the source of the Rs. 3.96 lakhs addition was explained. Therefore, the addition was deleted.

Arbitrary Observations by CIT (A):
The CIT (A) made observations questioning the appellant's cash withdrawals and redeposits. The Tribunal found these observations arbitrary and baseless. The Tribunal emphasized that the appellant's explanations were reasonable, and the CIT (A) erred in upholding the AO's actions without proper consideration of the appellant's submissions.

Acceptance of AO's Version:
The AO held that the appellant failed to explain the source of cash deposits. The Tribunal disagreed, noting that the appellant had provided evidence of salary income and cash withdrawals. The AO's conclusion that only Rs. 2.5 lakhs was available for redeposit lacked material evidence. The Tribunal found that the earlier withdrawals accounted for the disputed amount, leading to the deletion of the addition.

Delay in Filing Appeal:
The appellant faced a delay of 282 days in filing the appeal, attributed to the Covid period and wrong advice from the Chartered Accountant. The Tribunal, considering the Supreme Court's judgment on exclusion of Covid period in limitation calculations, condoned the delay of 44 days. The Tribunal admitted the appeal for adjudication, emphasizing the valid reasons for the delay.

Conclusion:
The Tribunal allowed the appeal, overturning the addition of Rs. 3.96 lakhs to the appellant's income. The Tribunal found that the source of the disputed amount was explained through earlier withdrawals. The delay in filing the appeal was condoned, and the case was decided in favor of the appellant.

Judge's Separate Judgement:
No separate judgment was delivered by the judge in this case.

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