Sathya Reddy Vs ITO (ITAT Bangalore)
The Bangalore ITAT held in favour of the assessee where the CIT(A), after deleting the AO’s original addition on cash withdrawals, made a fresh addition of Rs. 75.16 lakh in respect of cash re-deposits. The Tribunal found that this fresh addition was unsustainable both on procedure and on merits. It noted that the CIT(A) had changed the very basis of the addition from withdrawals to deposits without issuing a proper enhancement notice, which violated principles of natural justice.
On merits also, the Tribunal accepted that the source of the cash was duly explained. The bank records showed that the assessee had received a DHFL loan, out of which amounts were withdrawn; part of the money was spent on agricultural land development, while the balance was later re-deposited when a proposed property deal did not go through. Since the source of the withdrawn cash was already explained and there was no evidence of any alternative undisclosed source, the re-deposit could not be treated as unexplained money under section 69A. Accordingly, the Tribunal deleted the fresh addition and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is filed by the assessee challenging the order of the National Faceless Appeal Centre (NFAC), Delhi, dated 15/07/2025, in respect of the Assessment Year 2018-19. The assessee has raised the following ground of appeal:-
“On the facts and in the circumstances of the case, the impugned addition by applying the provisions of sec.69A of the Act as made by the assessing authority, as upheld by the CIT(A), is opposed to law and to the principles of natural justice in that no adequate opportunity had been given to the appellant to explain the cash deposit in the bank account.
2. The learned CIT(A) and AO having failed to peruse the documents furnished by the appellant, the impugned addition as made was totally uncalled for and liable to be deleted.
3. The CIT(A) has erred in law and on facts in upholding the erroneous order of the Learned AO.
4. The Ld.CIT(A) has erred in law and on facts in not issuing mandatory notice under section 251 of the Act before undertaking enhancement or changing the basis of addition;
5. The Learned AO!CIT(A) have erred in law and on facts in making an addition of Rs.. 75,16,000!– under section 69A of the Act as unexplained money;
6. The Learned AO!CIT(A) have erred in law and on facts in not appreciating the source of cash as was duly evident considering the documents available on record during the course of proceedings.
7. The Learned AO!CIT(A) have erred in law in questioning the veracity of the entries in the cash book when the same was evident from the bank statements as already furnished before him;
8. Without prejudice to the fact that the Appellant is not required to explain the reason for withdrawals, the learned AO!CIT(A) has erred in law and on facts in not appreciating the Appellant’ submission in this regard;
9. The Learned CIT(A) has erred in law and on facts in questioning the explanation of the Appellant with respect to the cash found, merely on the basis of the period of holding and without appreciating the reasons for such holding.
10. The Learned CIT(A) has erred in law in not appreciating that unless the Learned AO proves that the cash withdrawn is used for other purposes, the same is presumed to be available for redeposits(as found and seized).
11. The Learned AO!CIT(A) have failed to appreciate that the provisions of section 69A!68 are inapplicable on the facts and circumstances of the case;
12. The addition under section 69A/68 is liable to be deleted as the Appellant has discharged the initial burden cast upon him under the said provisions of the Act;
13. The impugned adjustments being merely based on presumption and surmises, are to be deleted;
14. The actions of the Learned AO are contrary to the provisions of the Act, facts of the case, arbitrary and without any application of mind;
15. The Learned AO has erred in raising demand vide issue of notice under section 156 of the Act;
16. The learned CIT(A) and AO erred in levying the Tax and Additional Tax under sec 115 BBE of the Act.
17. The learned CIT(A) and AO erred in levying the interest under sec 234A, of the Act.
18. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.
(Tax effect Rs. 58,62,480/-)
On the basis of the above grounds and other grounds which may be urged at the time of hearing with the consent of the Honourable Tribunal, it is prayed that the order passed under section 143(3) of the Act as upheld by the Commissioner of Income Tax (Appeals), be quashed and relief sought be granted.”
2. The brief facts of the case are that the assessee is an individual who earned agricultural income, income from house property, and income from other sources. The assessee filed his return of income on 22/02/2018. Subsequently, the case was selected for scrutiny to examine cash deposits and withdrawals made during the year. Notices under Section 143(2) and Section 142(1) were issued and in response to which the assessee furnished the required details.
