2018 (12) TMI 1583 - AT - Income Tax

Unexplained cash deposits in the bank account u/s. 69 - Held that - The total cash withdrawn from the bank account by the assessee was ₹ 20,91,500 17,71,800 which was withdrawn by his self-cheque. There was also a deposit of ₹ 9 lakhs in the bank account in March, 2013. After excluding the cash deposit, net cash available with assessee from the withdrawals was a sum of ₹ 29,63,000. The availability of cash as a source of deposit in the bank account was disbelieved by the AO for the only reason that it was highly improbable for a person to keep withdrawals in the bank account for a period of two years. The Hon ble Karnataka High Court in the case of S.R. Venkataraman (1980 (8) TMI 73 - KARNATAKA HIGH COURT) had taken a view that withdrawals of cash in the past as a source of deposit at a later point of time in the bank account cannot be disbelieved merely on the surmise that it was improbable for an assessee to keep cash withdrawn for two years. Revenue authorities were not competent to dictate as to what the assessee should do with the money withdrawn from the bank. The court held that as long as the source is explained and established and if money is withdrawn from SB account and paid to discharge loan by deposit into a loan account, it is not possible to hold that the source is not explained. The Court also held that money might have been utilized in the interregnum period for some purpose and thereafter appropriated towards discharge of loan. But that fact cannot be held against the assessee. The aforesaid decision of the Hon ble Karnataka High Court in the facts and circumstances of the present case supports the plea of the assessee. The revenue authorities were not justified in rejecting the explanation of assessee with regard to source of deposit of cash in the bank account. The consequent addition made is directed to be deleted and the appeal of the assessee is allowed.

Summary

Issues:
- Addition of unexplained cash deposits in the bank account under section 69 of the Income-Tax Act, 1961.

Detailed Analysis:

Issue 1: Addition of Unexplained Cash Deposits
1. The appellant, an individual earning commission as an insurance agent, challenged the addition of ?25 lakhs as unexplained cash deposits in the bank account for the assessment year 2014-15.
2. The Assessing Officer (AO) based the addition on cash deposits identified through an AIR report, leading to scrutiny due to unexplained deposits.
3. The CIT(Appeals) initially confirmed the addition; however, on appeal, the appellant contended that the same deposit of ?25,05,050 was reflected twice in the report, reducing the unexplained amount.
4. The appellant explained the cash deposits as withdrawals and a loan from LIC of India, which was subsequently withdrawn in cash, supported by a statement of withdrawals from April 2009 to May 2013.
5. The CIT(Appeals) rejected the explanation, deeming it improbable that withdrawals from two years prior were kept in cash by the appellant, leading to the rejection of the plea.
6. The appellant, relying on a Karnataka High Court decision, argued that the source of cash deposits from withdrawals cannot be doubted merely based on the delay between withdrawal and deposit.
7. The Tribunal, after considering the withdrawals and deposits, found the revenue authorities unjustified in rejecting the explanation, citing the High Court's stance that as long as the source is established, the utilization of the withdrawn money is not a concern for the Department.
8. Consequently, the addition was directed to be deleted, and the appellant's appeal was allowed, emphasizing the importance of explaining the source of funds rather than the interim utilization of withdrawn amounts.

This comprehensive analysis of the judgment highlights the key issues, arguments, and legal principles involved in the case, providing a detailed understanding of the decision.