Kavita Vs ITO (ITAT Delhi)
Earlier Cash Withdrawals Can Explain Later Bank Deposits, but Household Spending Must Be Accounted For: Delhi ITAT
Cash withdrawn from a bank in an earlier year can form part of the source for deposits made in a later year, if the assessee demonstrates that the cash remained available. At the same time, a cash-flow statement cannot ignore ordinary household spending. Applying both propositions, the Delhi ITAT in Kavita v. ITO, ITA No. 4477/Del/2026, reduced an addition for unexplained bank deposits from ₹5,47,165 to ₹2 lakh. The order was pronounced on 29 September 2026 for AY 2009–10.
How the Dispute Arose
The assessee reported income from an in-house boutique and savings bank interest. During FY 2008–09, she deposited ₹25,38,900 in cash into her bank account. She explained that the deposits came from cash withdrawn from the bank during that year and the preceding year, along with ₹3 lakh received from the sale of eucalyptus trees.
In the original scrutiny assessment, the AO allowed credit of ₹16,91,735 for withdrawals made during FY 2008–09. He did not accept the balance of the explanation and added ₹8,47,165. The first appellate authority confirmed the addition, but the matter reached the ITAT, which sent it back to the AO for fresh examination.
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