Case Law Details
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.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The captioned appeal has been preferred by the assessee against the order dated 13.12.2023 of the Ld. Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as Ld. ‘CIT(A)’] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for Assessment Year (AY) 2018-19.
2. The assessee is an individual. The assessee in this appeal is aggrieved by the action of the Ld. CIT(A) in confirming the addition of Rs.39,15,987/-made by the Assessing Officer on account of estimation of extra gross profit by observing that the assessee had made cash withdrawals from his bank account.
3. At the outset, the ld. Counsel for the assessee has brought my attention to the impugned assessment order. A perusal of the impugned assessment would reveal that the Assessing Officer has reopened the assessment in this case u/s. 147 of the Act stating that the assessee has withdrawn an amount of Rs.1,70,47,000/- from her bank account with Syndicate Bank. This opening line of the assessment order would suggest that the reopening in this case is bad in law. The assessment can be reopened in respect of any income received by the assessee and not in respect of any withdrawal made by the assessee from her bank account. The amount lying in her bank account, is the money of the assessee and the assessee has every right to use it in the manner she wants. Withdrawal of her money from a bank account in no circumstances can be assumed to be a case of escapement of income. The reopening of assessment is not sustainable on this score alone. The reopening of the assessment is hereby quashed. The impugned addition is accordingly deleted.
4. In the result, appeal of the assessee stands allowed.
Order pronounced in the open Court.
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