TaxTMI 
TaxTMI 
2025 (6) TMI 2045
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....reating the cash deposits in the bank account during the demonetization period as unexplained income u/s. 69 of the Act. 2. That the Ld. CIT(A) failed to appreciate that the provisions of section 69 of the Act are not applicable to the facts and circumstances of the case of the appellant. 3. That the Ld. CIT(A) failed to appreciate that the cash deposits in the bank account during the demonetization period were sourced out of previous cash withdrawals, hence the same are duly explained and addition u/s. 69 of the Act is unwarranted. 3. The brief facts of the case are that the assessee an individual earning interest income, filed his return of income for the assessment year 2017-18 on 14.03.2018, declaring a total income of Rs. 9,94,670/-. The return was duly processed u/s. 143(1) of the Act. Subsequently, the case was selected for limited scrutiny under CASS to examine cash deposits made during the demonetization period. Accordingly, a notice u/s. 143(2) of the Act was issued on 10.08.2018, followed by a notice u/s. 142(1) of the Act on 10.05.2019. 4. During the demonetization period, the assessee deposited cash amounting to Rs. 15,10,500/- in his bank accou....
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....sing Officer as under: "In continuation to my discussion with you on 14/06/2019, I submit the following for your kind perusal: I had withdrawn cash from the bank during the years 2015 and 2016 of Rs. 42,50,000/-, as I explained in my earlier replies and submissions, I spent the amount for family maintenance and for family functions. The breakup of the expenditure: S.No. Particulars Amount (Rs.) 1 Jewellery Purchase (Copy of bills attached) 9,89,317 2 Medical Expenses (Copy of bills attached) 39,455 3 Furniture expenses (Copy of bills attached) 1,61,200 4 LIC Premium paid 21,840 5 Amount deposited in Bank 15,10,500 TOTAL 27,22,312 Besides the expenditure as mentioned above, during the period my daughter was miscarried once and delivered baby. The drawn amount was used for the Hospital expenses and for the family functions. Apart from this, my family expenditure per month will be approximately Rs. 1.00 lakh per month including medical and other expenditure. Once again I submit to your goodselves that the amount drawn from the bank is only for my family expenses. I humbly....
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....low statement, daily cash balances, and corresponding extracts from the cash book, thereby demonstrating the consistent availability of sufficient cash in hand prior to each deposit made into the bank account. It was explained that the cash deposits during the demonetization period were sourced from earlier cash withdrawals aggregating to Rs. 47,58,000/- made from the same bank account over the financial years 2014-15 to 2016-17. In support of this claim, the assessee submitted the relevant bank statements corroborated by the cash flow statement. It was further explained that the withdrawals were primarily intended to meet various family obligations and events, including the marriage of the assessee's daughter in June 2014 and the proposed (but later cancelled) marriage of the assessee's son in early 2016. To substantiate the actual application of funds, the assessee furnished documentary evidence including bills for jewellery, furniture, medical expenses, LIC premium payments, and household expenses, amounting to Rs. 32,19,812/-. After accounting for these expenditures, the assessee maintained that an unutilized cash balance of Rs. 15,38,188/- remained available, out of which Rs. ....
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....00 10,000 2 14.11.2016 5,00,000 10,000 3 22.11.2016 1,20,000 10,000 4 28.11.2016 1,50,000 24,000 5 05.12.2016 75,000 14,000 6 16.12.2016 75,000 8,000 7 20.12.2016 90,500 8,000 Total 15,10,500 5.6 Thus on the one hand the appellant is submitting that he was not having any business and the cash was deposited out of his previous withdrawals and on the other hand he is withdrawing as well as depositing cash on the same day. The fact also needs to be taken into consideration that the above period is the period of demonetization when there was heavy rush and long queues in every bank for deposit as well as withdrawal. The appellant has also not made clear that if Rs. 15 Lakh was withdrawn earlier and the same was opening cash in hand on 11th November 2016 then why the complete cash was not deposited at one go and the deposit was made in 7 parts from 11th November to 20th December over one month's time. Thus the arguments taken by the appellant are not maintainable. The following case laws can be looked at on the issue." 10. Aggrieved by the order of the ld. CIT(A), the assesse....
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....stituted re-deposits of earlier cash withdrawals. In light of this, the ld. AR argued that the assessee had satisfactorily demonstrated the source of the cash deposits amounting to Rs. 15,10,500/- and, accordingly, the addition made by the Assessing Officer u/s. 69 of the Act and sustained by the learned CIT(A) is unjustified and liable to be deleted. 14. Referring to the income tax returns filed by the assessee for the AYs 2015-16 to 2017-18, placed at pages 14 to 24 of the Paper Book, the ld. AR submitted that the assessee had declared total income of Rs. 9,64,490/- for AY 2015-16 Rs. 10,89,430/- for AY 2016-17, and Rs. 9,94,670/- for AY 2017-18. The ld. AR pointed out that the aggregate income declared over these three years amounted to Rs. 30,48,590/-, comprising solely of interest income, which had been duly credited to the assessee's bank account. It was further submitted that the cash withdrawn by the assessee from the bank account represented this interest income, which had already been subjected to tax. Therefore, the ld. AR contended that the re-deposit of such funds during the demonetization period cannot be treated as unexplained income. According to the ld. AR, the ....
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....i High Court in Jaya Aggarwal v. ITO [2018] 92 taxmann.com 108 (Del), submitted that the assessee's explanation regarding the re-deposit of previously withdrawn cash ought to be accepted in the absence of any contrary evidence or adverse findings brought on record by the Department. 19. The ld. AR further placed reliance on the following decisions of the coordinate benches of this Tribunal and contended that the mere existence of a time gap between cash withdrawals and their subsequent re-deposit cannot, by itself, be a valid ground to reject the assessee's explanation particularly in the absence of any specific finding that the withdrawn cash was utilized for some other purpose: i. Smt. Krishna Agarwal v. ITO (ITA No.53 / JODH / 2021) - Jodhpur Tribunal ii. Sudhirbhai Pravinkant Thaker v. ITO [2017] 88 taxmamnn.com 382 (Ahmedabad Tribunal) 20. Based on the foregoing submissions, the ld. AR prayed for the deletion of the addition of Rs. 15,10,500/- made by the AO u/s. 69 of the Act, by setting aside the order passed by the ld. CIT(A) and allowing the appeal of the assessee. 21. Per contra, the ld. DR placed reliance on the orders of the Assessing Officer ....
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....nate use of funds, cannot be a valid ground to disbelieve the assessee's explanation. Furthermore, there is no legal bar on an assessee retaining cash in hand for a reasonable period, particularly when the source of such cash is accounted for and traceable through bank withdrawals. The AO's inference that no prudent person would hold cash and forego interest is speculative and not based on any evidence specific to the assessee's financial conduct or circumstances. 24. It is also an undisputed fact that the assessee's sole source of income is interest, as accepted by the AO. There is no allegation or finding on record to suggest that the assessee has any other source of income. Therefore, in the absence of any contrary evidence or material brought on record by the AO, the cash deposits made in the bank account cannot be presumed to represent income from an undisclosed source. The AO's primary concern appears to be that a prudent person would not keep substantial cash in hand, thereby foregoing interest income, and has presumed that the cash withdrawn must have been utilized for some other purpose. However, such a presumption is merely based on conjecture and not supported by ....
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....e extent of about Rs..5,20,000/- towards loan account, it cannot be said that the source of the said deposit is not properly explained. Merely because there is a delay of 40 days from the date of withdrawal of the money from the bank account to the date of deposit in the loan account. Once money is shown to be in the account and withdrawn, what the assessee did with that money till it was actually deposited, is not the concern of the Department. As long as the source is explained and established and when the money is withdrawn from a savings bank account and paid to discharge loan by deposit into a loan account, it is not possible to hold that the source is not explained. In that interregnum period, if the very same money is utilised for other purpose and thereafter, it is appropriated towards discharge of a loan, that cannot be held against the assessee. In that view of the matter, the finding recorded by the Tribunal is erroneous and requires to be set aside. Therefore, the said substantial question of law is also held against the revenue and in favour of the assessee." 27. The Hon'ble Delhi High Court in Jaya Aggarwal v. ITO [2018] 92 taxmann.com 108 (Del) has held as under: ....