2025 (7) TMI 1359 - AT - Income Tax

Cash deposits of Rs. 5L not unexplained under ITAT; withdrawals and opening balance proved via cash flow statement

The ITAT Delhi held that the assessee's cash deposits of Rs. 5,00,000 were not unexplained, as subsequent withdrawals totaling Rs. 9,50,000 and an opening ... Unexplained cash deposits - effect of subsequent withdrawals - HELD THAT:- It is already come on record that not only the assessee has withdrawn Rs. 9,50,000/- on 10.06.2010 which followed subsequent withdrawal but also the learned lower authorities have simply brushed aside his submissions of having opening cash of Rs. 6,58,000/- going by the cash flow statement, without substantiating the impugned addition. That being the case, find no merit in the learned lower authorities' action treating the assessee's cash deposits of Rs. 5,00,000/- as unexplained which is directed to be deleted. Assessee's appeal is allowed. The appeal concerns the reassessment under section 143(3) read with section 147 of the Income Tax Act, 1961, for AY 2012-13, challenging the treatment of cash deposits totaling Rs. 14,58,000/-. The Assessing Officer (AO) and CIT(A)/NFAC upheld an addition of Rs. 4,00,000/- as unexplained, rejecting the assessee's claim of an opening cash balance of Rs. 6,58,000/-. The AO justified the reassessment by obtaining prior approval from the Pr. CIT, and the assessee did not dispute the reopening's validity during proceedings. The tribunal noted that the lower authorities dismissed the assessee's explanation regarding cash withdrawals and the opening balance without adequately substantiating the addition. The tribunal found that the AO and CIT(A) failed to justify treating Rs. 5,00,000/- of the cash deposits as unexplained. Consequently, the tribunal held that the addition of Rs. 5,00,000/- was unwarranted and directed its deletion. The appeal was allowed on this basis. Regarding the reopening, the tribunal affirmed the AO's compliance with procedural requirements, rejecting the assessee's contention that the reassessment was invalid. The decision underscores the principle that unexplained cash deposits must be substantiated by the revenue, and mere withdrawal or cash flow statements, if not disproved, cannot be summarily disregarded.