Unexplained cash deposits under Section 69A deleted when assessee proves earlier withdrawals and rental income

ITAT Bangalore allowed the assessee's appeal regarding unexplained cash deposits under Section 69A during demonetization. The assessee provided bank statements showing withdrawals and deposits, rent agreements, and tenant confirmations for cash rental income. The tribunal held that when an assessee claims earlier withdrawals were available for redeposit, credit cannot be denied without material evidence that funds were spent elsewhere. Following precedent from Karnataka HC, the tribunal deleted the addition for unexplained cash deposits, accepting the assessee's explanation of redepositing previously withdrawn cash and rental income.

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Issues Involved:
1. Addition of unexplained cash deposits u/s 69A.
2. Interest u/s 234B and 234D.

Summary:

1. Addition of unexplained cash deposits u/s 69A:
The crux of ground Nos. 2 to 5 pertains to the addition of Rs. 23,07,131/- u/s 69A of the Act. The assessee deposited Rs. 60,00,000/- during the demonetization period, claiming the cash was from earlier withdrawals and rental income. The AO accepted Rs. 33,07,869/- as explained but added Rs. 23,07,131/- as unexplained, citing a lack of nexus between withdrawals and deposits. The CIT(A) upheld this, referencing judgments in CIT Vs. Durga Prasad More and Sumati Dayal Vs. CIT, suggesting the explanation was an afterthought. The Tribunal, however, noted that similar cases have allowed credit for earlier withdrawals if no contrary evidence is presented, citing multiple precedents including S.R. Venkataratnam Vs. CIT and Sri Krishnamurthy Narayana Murthy Vs. ITO. The Tribunal directed the AO to give due credit for earlier withdrawals and rental income, thereby deleting the addition.

2. Interest u/s 234B and 234D:
Consequential to the above adjustment, the levy of interest u/s 234B and 234D amounting to Rs. 6,08,814 was deemed incorrect. The Tribunal did not specifically address this issue separately, implying that the deletion of the addition under u/s 69A would also nullify the interest levied.

Conclusion:
The appeal was allowed, and the addition of Rs. 23,07,131/- u/s 69A was deleted, with directions to the AO to give credit for earlier withdrawals and rental income. Consequently, the interest levied u/s 234B and 234D was also deemed incorrect.

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