Surya Prakash Rao Volam Vs ITO (ITAT Hyderabad)
Cash Withdrawn for Son’s Wedding Cannot Become Unexplained Money Merely Because It Returned in Instalments: Hyderabad ITAT Deletes Addition u/s 69A & Rejects 60% Tax Rate u/s 115BBE for AY 2017-18
The dispute
The Hyderabad Bench of the ITAT examined whether cash deposited during the demonetisation period could be treated as unexplained money u/s 69A despite corresponding withdrawals from disclosed bank accounts. The Tribunal held that once prior withdrawals were established, the Revenue could not disregard their availability merely on suspicion that the money might have been spent or because the deposits were made in several instalments.
The assessee, Shri Surya Prakash Rao Volam, had filed his return for AY 2017-18 declaring a total income of ₹12,64,000. His case was selected for limited scrutiny under CASS. The AO made certain disallowances relating to housing-loan interest & deductions claimed u/ss 80D, 80E & 80DDB, thereby recomputing the declared income at ₹17,07,174.
More significantly, the AO made an addition of ₹19,54,500 u/s 69A towards cash deposited in the assessee’s bank accounts during the demonetisation period. The assessment was consequently completed u/s 143(3) at a total income of ₹36,61,674. The first appellate authority sustained the addition, bringing the assessee before the Tribunal.
Cash accumulated for son’s marriage
The assessee explained that out of the total cash deposit of ₹19,54,500, a sum of ₹15,54,500 represented cash already available with him as on 8 November 2016. The remaining ₹4,00,000 allegedly represented Specified Bank Notes received from friends on 9 November 2016.
To establish the availability of cash, the assessee produced his bank statements. These reflected withdrawals of ₹5 lakh on 6 April 2016, ₹2 lakh on 13 April 2016, ₹1 lakh on 13 May 2016, ₹1.15 lakh on 30 May 2016, ₹1 lakh on 26 July 2016 & ₹5 lakh on 29 October 2016. Thus, total withdrawals before demonetisation amounted to ₹15.15 lakh.
The assessee further claimed that ₹39,500 was available from personal savings, resulting in total cash in hand of ₹15,54,500. The amounts were stated to have been accumulated for his son’s marriage, which was solemnised on 10 December 2016. A copy of the marriage certificate was produced in support.
Suspicion cannot replace evidence
The AO did not dispute the withdrawals reflected in the bank accounts. Nevertheless, he rejected the explanation on two assumptions. First, he suspected that the withdrawn money might already have been utilised for pre-marriage arrangements. Secondly, he reasoned that if such substantial cash was actually available, the assessee should have deposited it in one tranche on 10 November 2016 instead of depositing it in several instalments.
The Tribunal found both reasons founded on mere suspicion & conjecture. Once the assessee demonstrated substantial withdrawals from disclosed bank accounts, the burden shifted to the Revenue to bring some material on record showing that the withdrawn cash had subsequently been spent, utilised or was otherwise unavailable when the deposits were made.
No such material was produced by the AO. A time gap between withdrawal & redeposit, by itself, could not justify the conclusion that the cash had ceased to be available. Unless the Revenue established its actual utilisation for another purpose, the explanation could not be rejected merely on a presumption regarding what the assessee might have done with the money.
The Tribunal also noted that the assessee was a salaried individual. Nothing had been brought on record to show that he was carrying on an undisclosed business or any other income-generating activity capable of producing the impugned cash. The marriage certificate provided contemporaneous support for his explanation that the money was being accumulated for his son’s wedding.
Depositing cash in instalments is not incriminating
The Tribunal specifically rejected the AO’s expectation that the entire amount should have been deposited in a single tranche. The manner or timing in which an assessee deposits cash available with him does not determine its source or character.
The relevant enquiry is whether the assessee has satisfactorily explained the source of the deposit—not whether he deposited the money in a manner which the AO considers commercially or personally appropriate. Accordingly, the Tribunal accepted the availability of ₹15,54,500 & directed deletion of the addition u/s 69A to that extent.
₹4 lakh received from friends restored for verification
Regarding the balance amount of ₹4 lakh, the assessee claimed that it represented SBNs received from friends on 9 November 2016. Although the lower authorities had not produced any specific adverse material disproving this explanation, the assessee had also failed to furnish documentary evidence establishing the identity of the friends, receipt of the amounts & genuineness of the transactions.
The Tribunal therefore restored this limited issue to the AO for fresh adjudication. The AO was directed to examine the explanation & supporting evidence, if furnished, after granting the assessee an adequate opportunity of hearing.
Enhanced rate of 60% u/s 115BBE held inapplicable
The assessee also challenged the application of the enhanced 60% tax rate u/s 115BBE for AY 2017-18. Following its decision in Soma Shekhar Bingumalla v. ITO, which had considered the conflicting decisions in Deepak Maratha v. Union of India & Maruti Babu Rao v. ACIT, the Tribunal held that the enhanced rate of 60% was not applicable for the year under consideration.
The AO was accordingly directed to compute tax on any surviving addition at the rate applicable under the unamended provisions of section 115BBE. The appeal was thus partly allowed for statistical purposes.
Cases Discussed
- Soma Shekhar Bingumalla Vs. ITO, ITA No. 76/Hyd/2026, AY 2017-18, dated 29.07.2026.
- Deepak Maratha S/o Ramchandra Maratha Vs Union of India (Rajasthan High Court).
- Maruti Babu Rao Vs. ACIT (Kerala High Court).
- CIT Vs. Vegetable Products Ltd. (Supreme Court).
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT HYDERABAD
This appeal is filed by Shri Surya Prakash Rao Volam (“the assessee”), feeling aggrieved by the order passed by the Learned Addl/JCIT(A), Aurangabad (“Ld. Addl/JCIT(A)”) dated 31.12.2015 for the A.Y. 2017-18.
2. The assessee has raised the following grounds of appeal:
1. That the order of the Learned CIT(Appeals), NFAC is contrary to law, facts and circumstances of the appellant case.
2. That the learned CIT(Appeals), NFAC erred in confirming the addition of Rs. 19,54,500/- under section 69A r.w.s 115BBE of the Act, treating the genuine cash deposits during the demonetization as unexplained money, without properly appreciating the documentary evidences and explanations submitted by the appellant.
3. That the learned CIT(Appeals), NFAC erred in confirming the addition of Rs. 19,54,500/- made by the AO under section 69A r.w.s 115BBE of the Act, merely based on the surmises and assumptions, without bringing any adverse material on record.
4. That the learned CIT(Appeals), NFAC erred in upholding the applicable tax rate at 60% u/s 115BBE of Act for the impugned assessment year instead of applicable tax rate of 30%.
5. The appellant craves leave to add/alter/ modify the grounds of appeal as may be required for proper adjudication of the case.
SURYA PRAKASH RAO VOLAM
(APPELLANT)
3. The brief facts of the case are that the assessee is an individual who filed his return of income for the assessment year 2017-18 on 27.06.2017, declaring total income of Rs. 12,64,000/-. Subsequently, the assessee filed a revised return of income on 15.07.2016, declaring the same total income of Rs. 12,64,000/- as declared in the original return of income. The case of the assessee was selected for limited scrutiny under CASS and, accordingly, notice under section 143(2) of the Income-tax Act, 1961 (“the Act”) was issued by the Assessing Officer. After considering the submissions of the assessee, the Assessing Officer re-computed the declared income of the assessee at Rs. 17,07,174/- after making certain disallowances on account of interest on housing loan and deduction claimed under sections 80D, 80E and 80DDB of the Act. The Assessing Officer further made an addition of Rs. 19,54,500/- under section 69A of the Act on account of cash deposited by the assessee in his bank accounts during the demonetization period and, accordingly, completed the assessment under section 143(3) of the Act vide order dated 14.12.2019, assessing the total income of the assessee at Rs. 36,61,674/-.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee.
5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. At the outset, the Ld. AR submitted that the only issue involved in the grounds raised by the assessee relates to the addition of Rs. 19,54,500/- made by the Assessing Officer under section 69A of the Act on account of cash deposited by the assessee in his bank accounts during the demonetization period. In this regard, the Ld. AR submitted that the assessee had deposited total cash of Rs. 19,54,500/- during the demonetization period, out of which Rs. 15,54,500/- represented cash balance available with the assessee as on 08.11.2016 and the balance amount of Rs. 4,00,000/- represented amounts received from friends in Specified Bank Notes (“SBN”) on 09.11.2016. The Ld. AR, inviting our attention to the bank statements of the assessee placed at page nos. 21 to 38 of the paper book, submitted that the assessee had withdrawn cash of Rs. 5,00,000/- on 06.04.2016, Rs. 2,00,000/- on 13.04.2016, Rs. 1,00,000/- on 13.05.2016, Rs. 1,15,000/- on 30.05.2016, Rs. 1,00,000/- on 26.07.2016 and Rs. 5,00,000/- on 29.10.2016 from his bank accounts during the relevant year and prior to 08.11.2016. Thus, the assessee had made aggregate cash withdrawals of Rs. 15,15,000/- from his bank accounts before 08.11.2016. It was further submitted that the assessee was having an additional amount of Rs. 39,500/- out of his personal savings and, accordingly, the total cash available with the assessee as on 08.11.2016 was Rs. 15,54,500/-. The Ld. AR further submitted that the aforesaid cash withdrawals were accumulated by the assessee for the marriage of his son, which was ultimately solemnized on 10.12.2016. In support of the said contention, the assessee placed on record the marriage certificate of his son placed at page no. 42 of the paper book. It was further submitted that the assessee received an amount of Rs. 4,00,000/- in SBNs from his friends on 09.11.2016, which was also subsequently deposited in his bank account.
6. Inviting our attention to page no. 2 of the assessment order, the Ld. AR submitted that the Assessing Officer rejected the explanation of the assessee merely on the suspicion that the cash withdrawn by the assessee might have been utilized towards pre-marriage arrangements. The Assessing Officer further observed that, if the assessee was actually having such substantial cash in hand, he ought to have deposited the entire amount in one tranche on 10.11.2016 instead of depositing the same in several tranches. The Ld. AR submitted that the Assessing Officer had not brought any material on record to establish that the cash earlier withdrawn by the assessee had actually been spent or otherwise utilized before 08.11.2016. Accordingly, he prayed that the addition made by the Assessing Officer be deleted.
7. The Ld. DR, on the other hand, relied upon the orders of the lower authorities and submitted that there was no infirmity in the addition made by the Assessing Officer and sustained by the Ld. CIT(A).
8. We have heard the rival submissions and perused the material available on record. We have gone through the bank statements of the assessee placed at page nos. 21 to 38 of the paper book and find that the assessee had withdrawn aggregate cash of Rs. 15,15,000/- on various dates during the year under consideration from his bank accounts prior to 08.11.2016. The factum of such cash withdrawals has not been disputed by the lower authorities. The assessee has also explained that an amount of Rs. 39,500/- was available with him out of his personal savings and, thus, the total cash available with him as on 08.11.2016 was Rs. 15,54,500/-. We have also gone through the marriage certificate of the son of the assessee placed at page no. 42 of the paper book, which shows that the marriage was solemnized on 10.12.2016. The said document lends support to the explanation of the assessee that the cash withdrawn by him was being accumulated for the marriage of his son. We have further gone through the relevant observations of the Assessing Officer at page no. 2 of the assessment order, the relevant portion of which is to the following effect:
Assessee was asked to furnish the sources of the funds deposited in bank accounts. Assessee admitted that he has deposited the cash as discussed above. However, assessee has stated that he has cash in hand of Rs.15,54,500/- as on 08.11.2016 and Rs. 4 Lakhs were received from friends on 09.11.2016. As seen from the cash withdrawal pattern during the year and cash deposit pattern during demonetization, it is found that cash was withdrawn over a period of time with the intention of application of the cash withdrawn and the same was used as the assessee has withdrawn the money. The assessee contended that he withdrew for the marriage of his son which was nearing. This shows that that money was withdrawn for utilization ahead of marriage for pre-marriage arrangements. Therefore, money was put to use and assessee was not having any funds at his disposal on 08.11.2016. This fact is corroborated by the cash deposit pattern. If the assessee was having all the cash in hand on the first day of demonetization, he would have deposited on 10.11.2016 itself, the day on which he made cash deposit for the first time during demonetization period. But the cash was deposited over a period of time. Therefore, assessee’s theory of cash in hand is not corroborated by circumstantial evidences. In view of the above, it is clear that assessee has not been able to substantiate the sources of cash deposits with substantive documentary evidences. In view these facts, assessee has failed to prove the sources of demonetised cash deposited in banks. Considering these facts, assessee is unable to prove the sources of the cash of Rs.19,54,000/-, provisions of Section 69A of I T Act, 1961 are clearly attracted.
9. On perusal of the above, we find that the explanation of the assessee regarding availability of cash has essentially been rejected on two grounds. Firstly, the Assessing Officer suspected that the cash earlier withdrawn by the assessee might have been utilized towards pre-marriage arrangements. Secondly, the Assessing Officer was of the view that, if such cash was actually available with the assessee, the entire amount ought to have been deposited in one tranche instead of being deposited in several tranches. In our considered opinion, both the aforesaid reasons are based on mere suspicion and conjecture. Once the assessee has demonstrated substantial cash withdrawals from his disclosed bank accounts prior to 08.11.2016, the burden shifts upon the Revenue to bring some material on record to show that such cash had been spent, utilized or was otherwise unavailable with the assessee at the time of its subsequent deposit. No such material has been brought on record by the Assessing Officer. Merely because there was a time gap between the withdrawals and the subsequent deposits, in the absence of any evidence demonstrating utilization of the withdrawn cash for some other purpose, the explanation of the assessee cannot be rejected merely on presumption. Further, the assessee is a salaried individual and nothing has been brought on record by the Assessing Officer to demonstrate that the assessee was carrying on any undisclosed business or other income-generating activity from which the impugned cash deposits could have arisen. The explanation of the assessee regarding accumulation of cash for the marriage of his son also finds support from the marriage certificate placed on record. Therefore, in the absence of any contrary material, the availability of cash arising from the disclosed withdrawals cannot be disregarded merely on suspicion that the same might have been spent on pre-marriage arrangements. Similarly, the observation of the Assessing Officer that the assessee ought to have deposited the entire cash in one tranche instead of depositing it in several tranches cannot constitute a valid basis for treating the cash deposits as unexplained. The manner or timing in which an assessee chooses to deposit cash available with him cannot, by itself, determine the nature or source of such cash. What is relevant is whether the assessee has satisfactorily explained the source thereof. In the present case, we are satisfied that the assessee has satisfactorily explained the availability of cash of Rs. 15,54,500/- as on 08.11.2016. Accordingly, we direct the Assessing Officer to delete the addition to the extent of Rs. 15,54,500/- made under section 69A of the Act.
10. So far as the balance addition of Rs. 4,00,000/- is concerned, the assessee has explained that the said amount was received in SBNs from his friends on 09.11.2016. We do not find any specific adverse material brought on record by the lower authorities disproving the said explanation. However, at the same time, the assessee has also not placed before us any documentary evidence to substantiate the receipt of Rs. 4,00,000/- from his friends or to establish the identity of the persons from whom such amounts were received and the genuineness of the transactions. Therefore, in the interest of justice, we deem it appropriate to set aside this limited issue relating to the addition of Rs. 4,00,000/- to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall examine the explanation and supporting evidence, if any, furnished by the assessee and decide the issue in accordance with law after providing adequate opportunity of being heard to the assessee.
11. The assessee has also raised an alternative contention regarding the applicability of the enhanced rate of tax under section 115BBE of the Act. The assessee has challenged the levy of tax at increased rate of 60% under section 115BBE of the Act instead of 30% applicable for the year under consideration i.e. A.Y. 2017-18. We find that an identical issue has already been considered by this Tribunal in the case of Soma Shekhar Bingumalla Vs. ITO in ITA No. 76/Hyd/2026 for the assessment year 2017-18, dated 29.07.2026, wherein, at para nos. 18 to 21 of the order, the Tribunal has held as under:
18. We shall now deal with the grievance of the assessee that the AO had erred in subjecting the addition made under Section 69A of the Act to tax at the enhanced rate prescribed under the amended provisions of Section 115BBE of the Act.
19. We find that it is the contention of the Ld. AR that the amendment made to Section 115BBE by the Taxation Laws (Second Amendment) Act, 2016, enhancing the rate of tax, is prospective in nature and would, therefore, apply only ITA 76/HYD/2026 SOMA SHEKHAR BINGUMALLA from Assessment Year 2018-19 onwards. Consequently, according to the Ld. AR, the enhanced rate could not have been applied to the case of the assessee for the year under consideration, i.e., Assessment Year 2017-18.
20. We find substance in the Ld. AR’s contention, as the said issue is squarely covered by the judgment of the Hon’ble High Court of Rajasthan in the case of Deepak Maratha v. Union of India & Ors., CWP No.3625 of 2020, dated 27-05-2026. The Hon’ble High Court, after examining the scheme of the Taxation Laws (Second Amendment) Act, 2016 and the amended provisions of Section 115BBE of the Act, had concluded that although the amendment came into force with effect from 01-04-2017, the enhanced rate of tax could operate only prospectively and would, therefore, apply from Financial Year 2017-18, corresponding to Assessment Year 2018-19 onwards. The Hon’ble High Court further observed that the amending enactment does not contain any express provision conferring retrospective operation upon the amended provisions of Section 115BBE of the Act. At this stage, we deem it apposite to observe that the Hon’ble High Court of Kerala in Maruti Babu Rao v. ACIT, W.A. No.984 of 2019, has taken a contrary view and held that the enhanced rate of tax under the amended provisions of Section 115BBE would apply from Assessment Year 2017-18 itself.
21. We, thus, find that there are divergent views expressed by two Hon’ble High Courts on the issue before us. As per the settled position of law, in such a situation, and in the absence of any authoritative pronouncement of the Hon’ble jurisdictional High Court or the Hon’ble Supreme Court directly on the controversy involved, the view favorable to the assessee deserves to be adopted. We draw support for the aforesaid proposition from the judgment of the Hon’ble Supreme Court in the case of CIT v. Vegetable Products Ltd. (1973) 88 ITR 192 (SC), wherein it was held that where two reasonable constructions of a taxing provision are possible, the one favorable to the assessee should ordinarily be preferred. We respectfully follow the view taken by the Hon’ble High Court of Rajasthan in the case of Deepak Maratha v. Union of India & Ors. (supra), being the view favorable to the assessee, and hold that the enhanced rate of tax prescribed under the amended provisions of Section 115BBE of the Act is not applicable to the assessment year under consideration. Accordingly, we direct the AO to compute the tax liability of the assessee on the addition of Rs.4,07,481/- sustained by us hereinabove by applying the rate of tax as applicable under the unamended provisions of Section 115BBE of the Act.
12. On perusal of the above, we find that the Tribunal has considered the reliance placed by the assessee on the decision of the Hon’ble Rajasthan High Court in the case of Deepak Maratha Vs. Union of India & Others (supra) as well as the reliance placed by the Department on the decision of the Hon’ble Kerala High Court in the case of Maruti Babu Rao Vs. ACIT (supra), and ultimately held that the enhanced rate of 60% under section 115BBE of the Act is not applicable for the assessment year 2017-18. In the present case also, the assessment year under consideration is 2017-18. Therefore, respectfully following the aforesaid order of the Tribunal in the case of Soma Shekhar Bingumalla Vs. ITO (Supra), we hold that the enhanced rate of 60% under section 115BBE of the Act is not applicable to the assessment year under consideration. Accordingly, we direct the Assessing Officer to compute the tax liability of the assessee on the impugned addition by applying the rate of tax as applicable under the unamended provisions of section 115BBE of the Act.
13. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the Open Court on 4th September, 2026.
