Cash deposit in bank out of withdrawal made two years back-Revenue authorities can not dictate what assessee should do with cash withdrawn from bank
ABCAUS Case Law Citation:
ABCAUS 2602 (2018) (10) ITAT
Important Case Laws Cited/relied upon:
Smt P. Padmavathi v. ITO, ITA No.414 of 2009,
R. Venkataraman v. Commissioner of Income Tax ITR (127) 1981
The instant appeal was filed by the revenue against the order of the CIT(A) in confirming addition made by the Assessing Officer (AO) as unexplained cash deposits in the bank account u/s 69 of the Income-Tax Act, 1961 (the Act).
The assessee was an individual. The case of the assessee was selected for scrutiny for the reason that as per AIR report, there were cash deposits in his Savings Bank (SB) Account.
The assessee did not participate in the assessment proceedings and therefore assessment was completed by the AO to the best of his judgment by treating the entire cash deposits as unexplained cash of assessee and added the same to the total income.
The assessee preferred appeal to the CIT(Appeals). The plea of the assessee was that the cash deposits in bank were made by withdrawals made from his bank account and also by loan which was availed from LIC of India which was subsequently withdrawn in cash by the assessee.
However, the CIT(A) rejected the plea for the reason that having regard to the human probability and the normal course of human conduct, it cannot be believed that the past withdrawals i.e., withdrawals of two years earlier to the date of deposit would have been kept in cash by the assessee.
Aggrieved by the order of CIT(Appeals), the assessee preferred appeal before the Tribunal.
The Tribunal observed that the cash withdrawals made from the bank account by the assessee in past two years were sufficient to cover the cash deposits in question. 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 Tribunal noted that in a case, the Hon’ble 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in the bank account cannot be disbelieved merely on the surmise that it was improbable for an assessee to keep cash withdrawn for two years.
The Tribunal firther noted that the High Court held that 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 utilised in the interregnum period for some purpose and thereafter appropriated towards discharge of loan. But that fact cannot be held against the assessee.
The Tribunal opined that the decision of the Hon’ble High Court, in the facts and circumstances of the case supported the plea of the assessee.
Accordingly the Tribunal held that 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 was directed to be deleted.