Unproved Opening Cash Balance Cannot Support Cash Deposit Explanation: ITAT Amritsar

Sukhwinder Singh Vs ITO (ITAT Amritsar)

Summary: The Income Tax Appellate Tribunal, Amritsar Bench partly allowed the assessee’s appeal for AY 2017-18 and restricted the addition relating to unexplained cash deposits to ₹13.10 lakh. The assessment had been completed ex parte under section 144 of the Income Tax Act, 1961 on 29.12.2019 after notices under section 142(1) were allegedly not complied with. The Assessing Officer found cash deposits of ₹25.71 lakh in the assessee’s HDFC Bank account during 17.05.2016 to 06.08.2016 unexplained. The assessee also had cash deposits during the pre-demonetisation period from 11 November 2016 to 1 December 2016, which were explained from receipts on sale of agricultural crops supported by documentary evidence including “J” Form. The CIT(A) dismissed the appeal, observing that the document claimed as a cash flow statement was a ledger account and that several transactions described by the assessee as cash withdrawals were actually cheque payments to other persons. Consequently, those amounts could not be regarded as cash available with the assessee for subsequent redeposit.

Before the Tribunal, the assessee filed a 218-page paper book, though without the certificate prescribed under the ITAT Rules. It contained a cash flow statement detailing withdrawals and deposits in the HDFC Bank account. The Tribunal noted that the statement commenced with an opening cash balance of ₹3 lakh as on 01.04.2016, but evidence establishing the closing cash balance as on 31.03.2016 had not been filed and the matter was not discussed in the assessment order. It agreed that withdrawals reflected for the period 13.04.2016 to 17.05.2016 were not cash withdrawals by the assessee and therefore their benefit could not be allowed. However, the Tribunal found that deposits of ₹9 lakh each on 01.07.2016, aggregating to ₹18 lakh, were explained by equivalent withdrawals made on 29.06.2016 and 30.06.2016. On the other hand, interim bank deposits of ₹8.10 lakh together with agricultural expenditure of ₹5 lakh disclosed in the statement, aggregating to ₹13.10 lakh, were not satisfactorily explained. After considering the rival contentions, bank statement, computation of income and other material, the Tribunal therefore restricted the addition to ₹13.10 lakh instead of ₹21.71 lakh and granted consequential relief. The appeal was accordingly partly allowed.

FULL TEXT OF THE ORDER OF ITAT AMRITSAR

This appeal is filed by the assessee against the order of ld. CIT(A), NFAC, Delhi, passed u/s 250 of the IT Act, 1961, dated 30.05.2025, which has emanated from the order of the AO, passed u/s 144 of the Act, dated 29.12.2019.

2. Grounds of appeal taken in Form 36 are as follows:

“1. That the all notices issued under Section 142(1), being unsigned and unauthenticated, is invalid in law, and the assessment proceedings based thereon are liable to be quashed.

2. That the authorities below erred in treating cash deposits of ₹25,71,000 as unexplained despite the same being fully supported by opening cash balance and prior withdrawals for business purposes recorded in the Cash Account; rejection thereof is arbitrary and unsustainable in law.

3. That the Revenue is trying to step into the shoes of the 61 years old physically disabled appellant and trying to make business decisions on his behalf, which is in complete violation of law.”

3. Brief facts emerging from records are that the cash has been deposited by the assessee in bank amounting to Rs.18.14 lakhs and in absence of any return on record, proceedings were initiated vide issue notice u/s 142(1) on 15.02.2018 and in absence of any compliance to such notice and also to subsequent notices issued by the AO, the assessment was completed ex parte u/s 144 on a total income of Rs.25.71 lakhs (being the cash deposited in bank during the pre-demonetisation period) from 11 November 2016 to 1st December 2016 which explained out of receipts on sale of agricultural crops supported by documentary evidences including “J” Form. However, it was also observed by the AO that the deposits of cash in bank account in HDFC Bank for the period 17.05.2016 to 06.08.2016 totalling 25.71 lakhs has remained unexplained and the same has been added back as income of the assessee.

4. The matter carried in appeal before the ld. first authority has been dismissed by the Ld. CIT(A), by observing in para 4.10 of the appellate order as follows:

“4.10 I have carefully examined the material submitted by the assessee/appellant. No cash flow statement has been furnished by the appellant and the documents, which the appellant claims as cash flow statement, is rather a simple ledger account statement, maintained in his books of accounts, which fails to specify the nature of outward and inward transactions carried out during the concerned financial years. Furthermore, the appellant has categorically stated that there were withdrawals during the concerned year from the said bank account and the same amount was deposited back during the concerned year. However, on perusal of the various entries shown in the bank account furnished by the appellant, it emerges that what he is trying to term as cash withdrawal, to mislead the revenue, are in fact cheque payment which implies that the amount was withdrawn by someone else rather than the appellant, as the appellant has been trying to wrongly project, in an attempt to mislead the assessment proceedings as well as the present proceedings. The transactions carried out on 13.04.2016, 16.04.2016, 21.04.2016, 26.04.2016, 29.04.2016, 09.05.2016, 16.05.2016 and 17.05.2016 typically shows the remarks as “CHQ-PAID-Kapurthala I”. In other words, there have been no cash withdrawals by the appellant and the cheques have been issued to other persons who had withdrawn the amount. As a result, these withdrawals could not have been available with the assessee, in order to become the source of subsequent deposits back into the same bank account as claimed by the assessee. Thus, in my considered view, the claim of the appellant is false, misleading and devoid of any merit.

5. Now the assessee is before the tribunal on the ground contained in the memorandum of appeal and in course of hearing the assessee has filed a voluminous paper book containing 218 pages but without the certificate as per the ITAT, Rules………however, it is seen that the said paper book contains a cash flow statement which gives a detail of the cash withdrawal and deposits in HDFC Bank, the relevant part of which is reproduced for ready reference:

SUKHWINDER SINGH
HNO. 61, TALWANDI PAI
Statement of Account

Period: 01/04/16 – 31/03/17

A/c: CASH

Page No.: 1

5.1 It starts on with an opening cash balance of Rs.3 lakh as on 01.04.2016 ( however, evidence of closing cash as on 31st March 2016 has not been filed before us and is nowhere discussed in the assessment order), thereafter the withdrawals as reflected in the said statement of account for the period 13.04.2016 to 17.05.2016 (as observed by the ld. CIT(A) are not cash withdrawals by the assessee and as such, the benefit of the same cannot be allowed to the assessee. It is further observed that the deposits of Rs.9 lakhs on 01.07.2016 totalling Rs.18 lakhs are explained by the withdrawals of equivalent amount made on 29.06.2016 and 30.06.2016.

5.2 However, the deposits in bank account during interim period amounting to Rs.8.10 lakhs plus the expenditure on agricultural expenses amounting to Rs.5 lakhs as disclosed in the said statement totalling Rs.13.10 lakhs could not be satisfactorily explained.

6. The ld. DR relied on the order of the ld. CIT(A).

7. We have heard the rival contention and the bank statement and computation of income and materials before us. We are of the opinion that we restrict the addition of Rs.13.10 lakhs instead of the addition of Rs.21.71 lakhs and the assessee will get a consequential relief.

8. In the result, the appeal is partly allowed.

Order pronounced on 31.08.2026 under Rule 34(4) of the Income Tax Appellate Tribunal Rules 1963.