Sonavati Devi Vs ITO (ITAT Kolkata)
In the case of Sonavati Devi vs. ITO, the Income Tax Appellate Tribunal (ITAT) Kolkata ruled that mere cash withdrawals from a bank account cannot justify reassessment under Section 147 of the Income Tax Act, 1961. The case involved the assessee, an individual, who faced reassessment proceedings after withdrawing ₹1,70,47,000 from her Syndicate Bank account. The Assessing Officer (AO) treated the withdrawals as an indication of escaped income, leading to an addition of ₹39,15,987 based on estimated extra gross profit. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition. However, the tribunal found that withdrawal of funds does not constitute income and that reassessment must be based on income receipt, not how the assessee uses their own funds.
ITAT Kolkata emphasized that a taxpayer has full discretion over their bank funds, and withdrawing money cannot be deemed income concealment. Since no valid basis for reassessment existed, the tribunal quashed the reopening of the case and deleted the impugned addition. The ruling clarifies that reassessment under Section 147 must be founded on income-related concerns rather than routine financial transactions. Consequently, the assessee’s appeal was allowed, reaffirming that cash withdrawals alone do not justify tax reassessment.
