2018 (12) TMI 206 - AT - Income Tax

Addition of unexplained cash deposits - assessee could not establish any nexus between the frequent withdrawals and the subsequent deposit - AO made addition on the ground that he has come to the conclusion that cash deposits were from some other source of income which is not disclosed to the Revenue -Held that - AO nowhere in his order has brought out any material on record to show that assessee is having any additional source of income other than that disclosed in the return nor Assessing Officer could spell out in his order that cash deposits made by the assessee was from some undisclosed source. All throughout Assessing Officer has raised suspicion on the behavioral pattern of frequent withdrawal and deposits by the assessee. There is no law in the country which prevents citizens to frequently withdraw and deposit his own money. Documentary evidences furnished before the Revenue clearly clarifies that on each occasion at the time of deposit in her bank account, assessee had sufficient availability of cash which is also not disputed by the Revenue. Entire transaction of withdrawals and deposits are duly reflected in the bank account of the assessee and are verifiable from relevant records.Assessing Officer himself admitted that assessee had sufficient cash balance on each occasion at the time of deposit in her bank account on different dates during the assessment year under consideration - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition of ?1,35,61,000/- as unexplained cash deposits.
2. Onus of proving the source of cash deposits and its re-deposits.

Issue-Wise Detailed Analysis:

1. Deletion of Addition of ?1,35,61,000/- as Unexplained Cash Deposits:
The Revenue's primary grievance was the deletion of the addition of ?1,35,61,000/- by the CIT(A), which was initially added by the Assessing Officer (AO) as unexplained cash deposits. The AO observed that the assessee frequently withdrew and deposited large sums of cash in her bank accounts, which was deemed suspicious and indicative of unaccounted money. The AO concluded that these deposits were from undisclosed sources and added them to the assessee's income under the head "income from undisclosed sources."

The CIT(A), after reviewing the assessment order, submissions, and supporting documents provided by the assessee, found that the assessee had sufficient cash available at the time of each deposit, which was corroborated by bank statements and cash flow statements. The CIT(A) noted that the AO did not bring any material evidence to show that the cash withdrawn was used elsewhere or that the deposits were from undisclosed sources. The CIT(A) held that the AO's suspicion and doubts were without basis and that the addition of ?1,35,61,000/- was unjustified and contrary to the provisions of the Income Tax Act.

2. Onus of Proving the Source of Cash Deposits and Its Re-Deposits:
The AO argued that the assessee failed to establish a nexus between the frequent withdrawals and subsequent deposits and did not provide documentary evidence to prove the source of the cash deposits. The AO was skeptical of the behavioral pattern of the assessee, frequently withdrawing and depositing cash despite having sufficient cash on hand.

In response, the assessee provided a detailed cash flow statement, bank statements, and other documentary evidence to demonstrate that the cash deposits were from her own funds, which were withdrawn and re-deposited as needed. The CIT(A) accepted the assessee's explanation, noting that the AO did not provide any evidence to contradict the assessee's claims or to show that the cash was used for other purposes. The CIT(A) emphasized that the AO's doubts and suspicions were not sufficient to discredit the assessee's documented transactions.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, agreeing that the AO did not provide any material evidence to support the claim that the cash deposits were from undisclosed sources. The Tribunal noted that the assessee had sufficient cash available at the time of each deposit, as evidenced by the bank statements and cash flow statements. The Tribunal concluded that there is no law preventing frequent withdrawals and deposits of one's own money and that the AO's suspicions alone were not enough to justify the addition of ?1,35,61,000/- as income from undisclosed sources. Thus, the appeal of the Revenue was dismissed, and the relief granted to the assessee by the CIT(A) was sustained.