2023 (7) TMI 274 - AT - Income Tax

Addition u/s 68 - Cash deposited in Bank - Unexplained deposits - As submitted assessee has re-deposited cash out of preceding withdrawals coupled with the inability of assessee to earn any income from any source (except pension) - HELD THAT - The explanation offered by Ld. AR from assessee s side with regard to the source of deposits are satisfactory and therefore no addition could be made on account of unexplained cash. As rightly contended by Ld. AR that the withdrawals of cash from the bank a/c prior to deposits is not disputed by revenue. Notably, the assessee has also given a convincing explanation for the reason behind cash withdrawals and re-deposit in bank a/c, which is the medical exigencies caused by Bhopal Gas Tragedy. If the sources of deposits are explained from prior cash withdrawals and the department has not disputed prior cash withdrawals, subsequent deposits cannot be treated as explained and no addition could be made. Assessee re-circulated those moneys by way of deposits, withdrawals and redeposits in the Bank A/c from time to time and the deposits/withdrawals made in current year also have the same genesis but since the assessee is a medical challenged retired employee, a complete track of the same could not be maintained/explained. We find weightage in this submission of AR. Also the assessee is unfit to earn any income due to several diseases and the only source of income is pension. Thus the assessee has satisfactorily explained the source of cash deposits - Decided in favour of assessee.

Summary

Issues involved:
The issues involved in this case include the application of section 69 of the Income-tax Act, 1961 regarding unexplained cash deposits, the adequacy of explanation provided by the assessee for the source of cash deposits, and the consideration of medical exigencies as a valid reason for cash withdrawals and re-deposits.

Application of Section 69 of the Income-tax Act:
The assessee, a retired employee earning income from pension, was questioned by the Assessing Officer (AO) regarding cash deposits of Rs. 16,21,000 made in a bank account. The AO, unconvinced by the explanation provided by the assessee regarding the source of these deposits, applied section 69 of the Act and made an addition on account of unexplained deposits.

Adequacy of Explanation by the Assessee:
In the first appeal, the assessee detailed the medical challenges faced due to the Bhopal Gas Tragedy, which necessitated frequent cash withdrawals for medical treatment and travel. The assessee's representative demonstrated through bank pass-book entries that the withdrawals and re-deposits were related to medical emergencies, with smaller deposits made on multiple occasions following withdrawals. The representative argued that the withdrawals and re-deposits were interconnected, providing a clear explanation for the source of the deposits.

Consideration of Medical Exigencies:
The assessee's representative highlighted the medical conditions of the assessee and his wife, emphasizing the need for cash withdrawals for medical purposes. It was argued that the withdrawals and subsequent re-deposits were a result of medical emergencies, with the assessee being unfit to earn any income apart from pension. Citing precedents where similar cash transactions were accepted as genuine, the representative contended that the addition made by the AO was unjustified given the circumstances.

Decision:
After considering the submissions from both sides and examining the bank pass-book entries, the Appellate Tribunal found the explanation provided by the assessee's representative to be satisfactory. The Tribunal noted that the withdrawals preceding the deposits were not disputed by the revenue authorities, and the medical exigencies were a valid reason for the cash transactions. Emphasizing that the deposits were explained through prior withdrawals and medical challenges faced by the assessee, the Tribunal concluded that no addition could be made on account of unexplained cash deposits. Consequently, the appeal of the assessee was allowed, and the addition made by the AO was deleted.