Earlier cash withdrawals can explain later demonetisation deposits, so unexplained money addition was deleted.

Earlier cash withdrawals can be treated as available to explain later demonetisation-period deposits when there is no evidence that the withdrawn cash was used elsewhere. On that basis, the ITAT Cochin held that the addition made as unexplained money could not be sustained because the assessee had withdrawn cash earlier and the revenue had not rebutted its availability for the subsequent deposits. The addition was deleted and the issue was decided in favour of the assessee.

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Issues: Whether cash deposits in specified bank notes during the demonetisation period could be treated as unexplained money when earlier cash withdrawals were available for the later deposits.

Analysis: The assessee had withdrawn cash of Rs. 17,42,000 during the period from 13.04.2016 to 28.09.2016, and there was no material to show that those withdrawals were diverted for any other purpose. In the absence of evidence rebutting the availability of the withdrawn cash, the earlier withdrawals were available to explain the subsequent deposits. The addition made by the assessing authority and sustained by the first appellate authority was therefore not justified.

Conclusion: The addition of Rs. 4,83,500 as unexplained money was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The assessment addition based on demonetisation cash deposits was set aside, and the appeal succeeded.

Ratio Decidendi: Where earlier cash withdrawals remain unexplained as having been spent for any other purpose, they may be treated as available to explain later cash deposits, and an addition as unexplained money cannot be sustained without contrary evidence.

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