Dhanabalan Selvamuthu Kumar Vs ITO (ITAT Chennai)
Telescoping of Cash Deposits Allowed Against Cash Advances: ITAT Chennai Partly Deletes Bank Deposit Addition
The Chennai Bench of the ITAT partly allowed the assessee’s appeal for AY 2011-12 and granted relief by applying the principle of telescoping to unexplained bank deposits. The case arose from remand proceedings pursuant to an earlier ITAT order, where the Assessing Officer made an aggregate addition of ₹39.95 lakh towards unexplained cash deposits and credits in the assessee’s bank accounts.
The Tribunal noted that the assessee had admittedly received cash advances aggregating to ₹37 lakh during the relevant period, out of which confirmations for ₹22.05 lakh were accepted, while ₹14.95 lakh was sustained as unexplained. With respect to a separate cash deposit of ₹20 lakh treated as unexplained by the AO, the ITAT held that once substantial cash advances were accepted as received, the possibility of utilisation of such cash for subsequent bank deposits could not be ruled out. Applying the well-settled principle of telescoping to avoid double taxation of the same source, the Tribunal directed deletion of the ₹20 lakh addition by adjusting it against the explained cash advances.
Accordingly, the ITAT deleted ₹20 lakh out of the total addition of ₹39.95 lakh and sustained the balance additions. The appeal was thus partly allowed in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
The present appeal of the assessee is directed against the order dated 07.02.2025 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the Ld.CIT(A)”] arising out of the assessment order dated 31.12.2018 framed u/s.143(3) r.w.s 254 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] by the Income Tax Officer, Ward 1(5), Erode [hereinafter referred to as “the AO”] pertaining to the Assessment Year 2011-12.
