Umesh Satyanarayan Shah Vs ITO (ITAT Ahmedabad)
Ahmedabad ITAT: Cash Deposits Cannot Be Examined in Isolation From Corresponding Withdrawals – ₹18.31 Lakh Addition Restored for Verification of Bank Statement
The assessee had not filed a return of income for AY 2013-14 despite cash deposits aggregating to ₹18,31,050 in his bank account. Even after issuance of notice under Section 148, no return or effective response was furnished. Consequently, the AO completed an ex-parte reassessment under Sections 144/147 read with Section 144B, treating the entire ₹18.31 lakh as unexplained cash credit under Section 68.
The assessee remained non-compliant before the CIT(A) as well. The CIT(A) therefore dismissed the appeal, holding that the assessee was not interested in prosecuting it and that the AO’s action was neither arbitrary nor unreasonable.
Before the ITAT, however, the assessee produced the bank statement for 02.04.2012 to 31.03.2013 as additional evidence. His crucial contention was that the cash deposits had come from cash earlier withdrawn from the very same bank account. According to him, the AO had looked only at the credit entries while ignoring the corresponding debit/withdrawal entries, thereby failing to appreciate the transactions as a whole.
The Revenue itself accepted that since this bank statement had not been available during assessment, the AO should be given an opportunity to examine it.
The Tribunal held that the additional bank statement was necessary for deciding whether the ₹18.31 lakh cash deposits actually represented unexplained income and therefore admitted it as additional evidence.
Accordingly, the ITAT set aside the assessment and restored the matter to the AO, directing him to examine the sources of all cash deposits in light of the assessee’s claim of earlier cash withdrawals and thereafter pass a fresh assessment in accordance with law. The assessee was specifically directed to cooperate in the proceedings.
Key takeaway: Cash deposits cannot be viewed merely as isolated credit entries. Where the assessee claims that deposits represent redeposit of earlier bank withdrawals, the corresponding debit entries and complete bank-account movement must be examined before treating the deposits as unexplained income.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against the appellate order dated 19-02-2026 passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre NFAC (in short, referred to as the CIT(A)) u/s. 250 of the Income Tax Act, 1961 (herein referred to as “the Act”) relating to Assessment Year 2013-14.
2. Brief facts of the case are that the assessee did not file any return of income for assessment year 2013-14 though there was cash deposit to the tune of Rs. 18,31,050/- in his bank account. In response to notice u/s. ITA No. 1390/Ahd/2026 Assessment Year 2013-14
148 of the Act, assessee did not furnish any return. As there was no response to the notices, the Assessing Officer (AO) completed the assessment u/s. 144 /147 r.w.s. 144B of the Act assessing the total income at Rs. 18,31, 050/- u/s 68 of the Act.
3. Even during the course of appellate proceedings as there was non- compliance on the part of the assessee, the CIT(A) dismissed assessee’s appeal holding that (i) assessee was not interested in prosecuting the appeal and (ii) the action of the Assessing Officer was not arbitrary or unreasonable.
4. Aggrieved by the order of the CIT(A), the assessee is now in appeal before the Tribunal. Grounds of appeal raised by the assessee are as follows:-
“1. Admission of additional evidence (Rule 29): That the additional evidence by the Appellant may kindly be taken on record and admitted under Rule 29 of the ITAT Rules, 1963, the said additional evidence is in support of the Cash deposit made by the appellant which could not be furnished earlier due to bona fide reasons. Their admission will assist in a just adjudication and will not prejudice the Revenue, which may be afforded liberty to rebut, if so desired.
2. The Ld. AO erred in making an addition of Rs. 18,31,050/- u/s 68 of the Act in respect of cash deposits treated as unexplained cash credits, wherein the said cash deposits were made from cash earlier withdrawn from the bank account of the assessee, which is clearly evident from the bank statement. Thus, the impugned addition is unjustified and liable to be deleted or matter may kindly be set aside to the AO for verification of the documents.”
5. The ld. Counsel appearing for the assessee submitted that the bank account statement could not be furnished before the A.O. during the course of assessment proceedings and consequently, the Assessing Officer considered the credit entries in the bank account without examining the corresponding debit entries and true nature of transaction as a whole. He further submitted that the bank statement of account for the period 02-04-2012 to 31-03-2013 may be admitted as additional evidence as the same is necessary for deciding the present appeal.
6. The ld. D.R. submitted that since the additional evidence was not made available to the Assessing Officer during assessment proceedings, it is necessary that the A.O. may be given an opportunity to examine the contents of the same.
7. We have heard both parties and perused the materials available on record. The issue for adjudication is whether the A.O. was justified in treating cash deposits amounting to Rs. 18,31,050/- as unexplained income. As the additional evidence now produced before the Tribunal is necessary for deciding the subject matter of impugned addition, the same is admitted.
7.1 We, therefore, set aside the assessment order and direct the AO to examine the sources of all cash deposits in the light of the assessee’s claim and pass assessment order in accordance with provisions of the Act. The assessee is directed to co-operate during assessment proceedings without fail.
8. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 14-08-2026
