2022 (11) TMI 1112 - AT - Income Tax

Unexplained cash Deposits in bank account - availability of cash as a source for deposit into the bank account - HELD THAT - If the deposit of money in the bank account is preceded by withdrawal of money from the very same bank account, then the source of funds is prima facie demonstrated or explained by the Assessee. In the case of S.R.Ventakaratnam 1980 (8) TMI 73 - KARNATAKA HIGH COURT has held that once the Assessee discloses the source as having come from the withdrawals made on a given date from a given bank, it was not open to the revenue to examine as to what the Assessee did with that money and cannot chose to disbelieve the plea of the Assessee merely on the surmise that it would not be probable for the Assessee to keep the money unutilized. The decision of the Hon ble Karnataka High Court supports the plea of the assessee. It is seen that the cash deposits in the bank account are preceded by withdrawal from the very same bank account. The ratio laid down in the aforesaid judgment will apply to the facts of the present case. If the revenue wants to disbelieve the plea of the Assessee then it must show that the previous withdrawal of cash would not have been available with the Assessee on the date of deposit of cash in the bank account. AO and CIT(A) have proceeded purely on assumption and surmises that cash withdrawn was not available to the Assessee on completely extraneous factors. In our view, the Assessee has satisfactorily explained the source of funds out of which deposit of cash was made in the bank account. I therefore delete the addition made in this regard. Consequently, the appeal of the Assessee is allowed.

Summary

Issues:
- Source of cash deposit in the bank account
- Treatment of cash deposit under section 69A of the Income Tax Act, 1961
- Rejection of explanation by AO and CIT(A)
- Applicability of legal precedents
- Decision of the Tribunal

Analysis:
1. Source of cash deposit in the bank account: The appeal involved a case where the assessee, an individual and retired bank employee earning income in the form of pension, deposited a sum of Rs.15 lakhs in his bank account. The Assessing Officer (AO) questioned the source of this cash deposit, leading to a series of proceedings.

2. Treatment of cash deposit under section 69A of the Income Tax Act, 1961: The AO treated the cash deposit as unexplained money under section 69A of the Income Tax Act, 1961, due to the assessee's failure to provide a satisfactory explanation for the source of the deposited cash.

3. Rejection of explanation by AO and CIT(A): Both the AO and the Commissioner of Income Tax (Appeals) [CIT(A)] rejected the assessee's explanation, stating that the perceived need for withdrawing the cash was not adequately justified. They argued that a prudent person would not keep cash idle when it could earn interest in a fixed deposit.

4. Applicability of legal precedents: The assessee relied on a decision of the Single Member Bench of ITAT, Bengaluru, in a similar case where the Tribunal accepted the plea of the assessee. The Tribunal noted that if there was no evidence to show that the cash was utilized elsewhere, the availability of cash as a source for the bank deposit could not be dismissed.

5. Decision of the Tribunal: The Vice President of the ITAT, Bangalore, considered the rival submissions and found the explanation offered by the assessee regarding the source of the cash deposit to be satisfactory. The Tribunal emphasized that the withdrawal of cash from the bank account before the deposit was not disputed by the revenue. The VP held that the legal position supported the assessee's case, citing a judgment of the Karnataka High Court. The VP concluded that the revenue's disbelief in the assessee's plea was based on assumptions and surmises, ultimately deleting the addition made by the AO. Consequently, the appeal of the assessee was allowed, and the decision was pronounced in favor of the assessee in the open court.