Surya Kant Gupta Vs ITO (ITAT Delhi)
Revenue Must Prove Cash Withdrawals Were Spent – ITAT Follows Karnataka HC; No 60% Tax for AY 2017-18: Tribunal Applies Madras HC Ruling on 115BBE
Background
- Assessee: Late Shri Ram Babu Gupta (represented by legal heir Shri Surya Kant Gupta), retired Govt. employee.
- Return: Filed 07.03.2018 declaring income of ₹2.67 lakh.
- Scrutiny: Limited scrutiny to verify cash deposits.
- AO’s Assessment (u/s 144, 31.03.2016):
- Noticed cash deposits of ₹10.89 lakh in Canara Bank.
- Assessee later filed revised return (11.02.2019) declaring ₹3.19 lakh, including presumptive income u/s 44AD from bangle business.
- AO doubted genuineness of bangle business despite invoices & inspector’s report confirming existence of suppliers.
- Ignored revised return, treated cash deposits as unexplained u/s 69A r.w.s. 115BBE, added ₹10.89 lakh.
- CIT(A) : Confirmed AO’s addition.
- Appeal before ITAT: Challenged cash deposit addition.
Tribunal’s Findings
1. Cash Flow Explanation
- Assessee maintained two bank accounts (Canara Bank & SBI).
- Produced cash flow statements for FY 2015-16 & 2016-17 showing:
- Large cash withdrawals in earlier years.
- Opening balance (01.04.2016) of ₹5.30 lakh.
- Total withdrawals sufficient to cover both Canara Bank deposits (₹10.89 lakh) & SBI deposits (₹4.87 lakh).
- Tribunal held: Even if bangle sales story is disbelieved, adequate cash balance was available.
2. Burden of Proof
- Revenue failed to prove that earlier withdrawals were spent elsewhere.
- Relied on Karnataka HC in S.R. Venkataratnam v. CIT (127 ITR 807) – if cash withdrawals exist, burden shifts to Revenue to show they weren’t available.
3. Application of Section 115BBE
- Tribunal also noted Madras HC in S.M.I.L.E Microfiber vs. ACIT (2024) – enhanced 60% tax rate under amended s.115BBE applies only from 01.04.2017 onwards, not retrospectively.
- Thus, for AY 2017-18, higher rate cannot apply.
Decision
- Cash deposits fully explained by withdrawals & cash balance.
- Addition u/s 69A r.w.s. 115BBE deleted.
- Appeal allowed in favour of assessee
FULL TEXT OF THE ORDER OF ITAT DELHI
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