2025 (9) TMI 789 - AT - Income Tax

Additions under s.69A for alleged unexplained cash deposits disallowed where withdrawals exceeded deposits and revenue failed to disprove explanation

ITAT held that additions under s.69A for alleged unexplained cash deposits were not justified. The tribunal accepted that bank withdrawals exceeded ... Addition u/s 69A - cash deposits in the bank - Since, the assessee did not give a satisfactory explanation for the source, AO treated it as unexplained cash - HELD THAT:- It is admitted that the assessee made cash withdrawals from the bank. These withdrawals exceeded the cash deposits. This fact is also acknowledged by the AO. In such circumstances, a reasonable presumption can be drawn that the deposits were made out of earlier withdrawals. Revenue has not produced any material to show that the withdrawn cash was utilised elsewhere. Once the assessee has given a plausible explanation, the burden shifts to the Revenue to disprove it with evidence. No such evidence has been brought on record. It is true that a prudent person normally does not withdraw large sums only to keep them idle at home. But this reasoning alone cannot be a ground to make an adverse inference against the assessee. The law requires the Revenue to show positive material that the withdrawals were spent otherwise. In this case, no such finding is available. Appeal filed by the assessee is allowed. Assessee declared income of Rs.1,23,680. AO made an addition of Rs.48,50,000 as 'unexplained cash under section 69A' based on cash deposits during demonetisation; CIT(A) confirmed the addition. Records admitted cash withdrawals preceding the deposits, and withdrawals exceeded deposits-fact acknowledged by the AO. Tribunal held that, where the assessee provides a plausible explanation linking deposits to earlier withdrawals, 'Once the assessee has given a plausible explanation, the burden shifts to the Revenue to disprove it with evidence.' Revenue produced no material showing the withdrawn cash was utilised elsewhere. Tribunal rejected the inference that mere improbability of keeping large cash at home justifies an adverse finding, concluded the authorities had no positive evidence to the contrary, and directed deletion of the addition, observing that 'The addition is not sustainable in law.' Appeal allowed.