Case Law Details
Hamsakala Suresh Rao Vs ITO (ITAT Bangalore)
No 69A Addition When Deposits Linked to Earlier Withdrawals – Idle Cash Argument Not Enough- Burden Shifts to Revenue – Withdrawals Sufficient to Justify Deposits, Addition Deleted
Bangalore Tribunal in the case of has held that when cash deposits during the demonetisation period are supported by earlier withdrawals, such deposits cannot be taxed as unexplained u/s 69A.
Assessee, an individual, had filed return of income declaring ₹1,23,680 under the head “Income from Other Sources.” During assessment, AO noticed cash deposits of ₹48,50,000 in the Assessee’s bank account during the demonetisation period. As Assessee did not give a satisfactory explanation for the source, AO treated the deposits as unexplained money u/s 69A & made addition. CIT(A) upheld the addition.
Before Tribunal, the Assessee argued that sufficient cash withdrawals had been made from the same bank accounts prior to demonetisation, which were later redeposited. AO himself had recorded in his order that there were cash withdrawals. Therefore, deposits could not be treated as unexplained.
Revenue contended that there was no clear linkage established between withdrawals & deposits & in the absence of correlation, authorities were justified in taxing deposits u/s 69A.
Tribunal observed that cash withdrawals admitted by AO were in fact higher than the deposits made. In such circumstances, it was reasonable to presume that deposits came from earlier withdrawals unless Revenue could prove otherwise. The Department failed to bring on record any material to show that withdrawals were utilised elsewhere. Tribunal clarified that while a prudent person may not ordinarily withdraw large sums to keep idle at home, such reasoning alone cannot sustain an adverse inference in absence of evidence. Once Assessee provided a plausible explanation, the burden shifted to Revenue to disprove it with positive evidence, which it failed to do. Accordingly, Tribunal directed deletion of addition of ₹48,50,000 made by AO. The appeal of the Assessee was allowed in full.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal filed by the assessee against the order passed by the NFAC, New Delhi vide order dated 20-03-2025 in DIN No.ITBA/NFAC/S/250/2024-25/1074783431(1) for the assessment year 2017-18.
2. The present appeal is filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals) [CIT(A)] confirming the addition of ₹48,50,000/-. The addition was made by the Assessing Officer (AO) under section 69A of the Income Tax Act on account of cash deposits in the bank.
3. The assessee is an individual. He filed the return of income declaring ₹1,23,680/- under the head “Income from Other Sources.” During assessment, the AO noticed cash deposits of ₹48,50,000/- in the assessee’s bank account. Since, the assessee did not give a satisfactory explanation for the source, the AO treated it as unexplained cash under section 69A of the Act and added it to the total income of the assessee. On appeal, the learned CIT(A) confirmed the order of the AO.
4. Being aggrieved by the order of the ld. CIT-A, the assessee is in appeal before us.
5. The learned Authorised Representative (AR) of the assessee argued that there were sufficient cash withdrawals from the bank prior to demonetisation. These withdrawals were used for making the cash deposits during the demonetisation period. The AO himself has recorded in his order that the assessee made cash withdrawals. Therefore, the cash deposits cannot be treated as unexplained under section 69A of the Act.
6. Per contra, the learned Departmental Representative (DR) argued that the assessee failed to establish a clear link between the cash withdrawals and the subsequent deposits. In the absence of such correlation, the authorities below were justified in treating the deposits as unexplained.
7. We have heard both sides and examined the records. It is admitted that the assessee made cash withdrawals from the bank. These withdrawals exceeded the cash deposits. This fact is also acknowledged by the AO. In such circumstances, a reasonable presumption can be drawn that the deposits were made out of earlier withdrawals. The Revenue has not produced any material to show that the withdrawn cash was utilised elsewhere. Once the assessee has given a plausible explanation, the burden shifts to the Revenue to disprove it with evidence. No such evidence has been brought on record.
7.1 It is true that a prudent person normally does not withdraw large sums only to keep them idle at home. But this reasoning alone cannot be a ground to make an adverse inference against the assessee. The law requires the Revenue to show positive material that the withdrawals were spent otherwise. In this case, no such finding is available. Therefore, we are unable to agree with the conclusion of the AO and the ld. CIT(A). The addition is not sustainable in law. We accordingly direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed.
8. In the result, the appeal filed by the assessee is allowed.
Order pronounced in court on 4thday of September, 2025
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