Bandepal Mohammad Mehaboob Vs ITO (ITAT Bangalore)
Cash Deposit Cannot Be Treated as Unexplained Merely Because Retention of Earlier Withdrawals Appears Improbable: Bangalore ITAT
The assessee, a pensioner, deposited approximately ₹10.40 lakh in cash during the demonetisation period. He explained that the amount represented accumulated cash withdrawals made during FYs 2013-14 to 2016-17 for construction of a house. Due to family issues, the construction was prolonged and the unutilised cash was retained and later deposited into the bank. The AO rejected the explanation as practically improbable and treated the deposit as unexplained under section 68, while the CIT(A) sustained it under section 69A with consequential taxation under section 115BBE.
The Bangalore ITAT held that the explanation could not be rejected merely because retention of cash for a lengthy period appeared improbable. However, earlier cash withdrawals by themselves would not conclusively establish that the same cash remained available on the date of deposit.
The Tribunal admitted additional evidence comprising the construction plan, architect’s supervision certificate, leave-salary records, pension documents and treasury cheque, since these went to the root of the controversy. It restored the matter to the AO to verify the cash-flow statement, bank withdrawals, pension and leave-salary receipts, construction and household expenditure, utilisation of withdrawals and the actual cash available on the dates of deposit.
The AO was directed to consider the explanation objectively and not reject it merely on suspicion, surmise or the time gap between withdrawal and redeposit. The applicability of section 115BBE was also restored for determination based on the outcome of the principal addition.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is filed by the Assessee against the order of Ld. ADDL JCIT (A) Madurai vide DIN: ITBA/APL/S/250/2025-26/1083391285(1) dated 08-Dec-2025 for the Assessment Year 2017-18.
