Manojkumar Jethabhai Patel Vs ITO (ITAT Ahmedabad)
Ahmedabad ITAT: Bank Withdrawals Cannot Be Taxed as Unexplained Expenditure; Quashes Addition of Agricultural Income After Reopening Fails
The Ahmedabad ITAT condoned a delay of 59 days in filing the appeal and allowed the assessee’s appeal against the assessment made under Sections 147 read with 144B of the Income-tax Act for AY 2019-20. The Assessing Officer had reopened the assessment based on cash withdrawals of ₹29,76,150 from the assessee’s bank account and interest income, treated the cash withdrawals as unexplained expenditure under Section 69C, and added agricultural income of ₹5,32,540 as income from other sources under Section 69A. The Tribunal held that cash withdrawals from a bank account could not be treated as unexplained expenditure and found that the addition under Section 69C had been made without application of mind. Since the basis for reopening did not survive after deletion of the Section 69C addition, the Tribunal held that no addition could be made on any other issue and also deleted the addition relating to agricultural income, relying on the Gujarat High Court decision cited before it. Accordingly, both additions were deleted and the appeal was allowed.
The Ahmedabad ITAT allowed the appeal of an individual assessee by deleting additions of ₹29.76 lakh made u/s 69C and ₹5.32 lakh representing agricultural income. The assessment had been reopened on the ground that the assessee had made substantial cash withdrawals from his bank account and had earned interest income. The AO treated the cash withdrawals themselves as unexplained expenditure and also assessed the agricultural income as income from other sources.
The Tribunal held that the addition u/s 69C was wholly unsustainable. It observed that mere withdrawal of cash from one’s own bank account cannot constitute unexplained expenditure. Even if the withdrawn cash was subsequently spent, the source of such expenditure stood fully explained by the bank withdrawals. The Tribunal remarked that the AO had made the addition in a routine manner and without application of mind, and accordingly deleted the addition of ₹29.76 lakh.
With regard to the addition of ₹5.32 lakh towards agricultural income, the Tribunal noted that the reassessment had been initiated solely to examine the cash withdrawals. Since the very basis of reopening failed after deletion of the addition relating to cash withdrawals, the AO could not make any addition on another issue. Relying on the Gujarat High Court’s decision in CIT v. Mohd. Junaid Dadani (335 ITR 172), the Tribunal held that where no addition survives on the issue for which the assessment was reopened, no addition on any other issue can be sustained. Accordingly, the addition of agricultural income was also deleted and the appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 04.11.2025 for the Assessment Year (A.Y.) 2019-20 in the proceeding u/s 147 r.w.s 144B of the Income Tax Act [hereinafter referred as “the Act”].
