Addition made for not explaining frequent cash withdrawal and deposits in bank deleted as addition solely based upon suspicion not sustainable
ABCAUS Case Law Citation:
ABCAUS 3041 (2019) (06) ITAT
The instant appeal was filed by the assessee against the order of CIT(A) in sustaining addition of cash deposit as unexplained credit u/s 68 of the Income Tax Act, 1961 (the Act).
The Assessing Officer (AO) noted that there were large amount of cash deposits in the bank account of the assessee. On an inquiry in this regard, assessee explained that deposit was made out of cash withdrawal from the bank itself and opening balance of cash.
This plea was rejected by the Assessing Officer on the ground that the assessee had not explained reason for frequent withdrawals and deposits of cash in the bank account.
The Assessing Officer also observed that the assessee has not linked withdrawals of cash and opening balance with the deposits made in the bank. Hence, he added the aforesaid sum as unexplained credit u/s. 68 of the Act.
Upon assessee’s appeal CIT(A) sustained the addition.
The Tribunal found that sources of cash deposited in the bank account had been explained by the assessee as cash withdrawals from the bank itself and opening balance of cash. It was not the case of the Assessing Officer that the amount shown as withdrawals from bank and opening balance were not sufficient to cover the deposits in bank. It is also not the case that the Assessing Officer had discovered some other utilization of cash withdrawals.
The Tribunal opined that the Assessing Officer had rejected the assessee’s explanation only on the ground that the assessee had not given explanation for frequent withdrawal and deposits in the bank. The Assessing Officer had also observed that the assessee had not linked the deposits with the withdrawals.
The Tribunal opined that reasons attributed by the Assessing Officer for not accepting source of cash were purely based on surmises and conjecture and as per settled law, addition solely based upon suspicion is not at all sustainable.
The Tribunal was of the view that the assessee had shown adequate source for deposit in cash. The same had not been rebutted the authorities below by cogent reasoning.
Hence, the Tribunal set aside the orders of the authorities below and deleted the addition.