Cash withdrawal from bank can’t be taxed u/s 69C as unexplained expenditure – ITAT

Merely because assessee did not explain purpose of cash withdrawal from bank, it can not be taxed u/s 69C as unexplained expenditure

In a recent judgment, ITAT has deleted addition u/s 69C holding that an amount withdrawn from the bank account of the assessee, the source of which is not in dispute, can not partake the character of income merely because the assessee did not explain the purpose for which such withdrawal was made.

ABCAUS Case Law Citation:
5217 (2026) (08) abacus.in ITAT

Important Case Laws relied upon by Parties:
M/s. Jansampark Advertising and Marketing (P) Ltd

In the instant case, the assessee had challenged the order passed by the CIT(A)/ National Faceless Appeal Centre (NFAC) in confirming addition u/s 69C of the Income Tax Act, 1961 (the Act).

The Assessing Officer was in possession of information regarding large cash deposits and withdrawals in the bank account of the assessee. Therefore, the case of the assessee was re-opened for assessment u/s 147 of the. The assessee furnished the requisite explanation. However, the Assessing Officer observed that the explanation furnished by the assessee was not acceptable on the ground that the assessee had failed to explain the purpose of the cash withdrawals amounting. Accordingly, the AO treating the amount of cash withdrawals from bank as unexplained expenditure u/s 69C of the Act and made an addition.

The CIT(A) dismissed the appeal of the assessee observing that the appellant had accepted that he had no plausible explanation for the cash withdrawal”.

Before the Tribunal, the assessee contended that both the lower authorities had misdirected themselves in making and sustaining the addition merely on account of cash withdrawals from the assessee’s bank account. He further contended that it was not the case of the Revenue that the authorities below had any doubt regarding the source of the cash deposits made by the assessee.

Thus, the assessee contended that the addition cannot be sustained. Firstly, on the ground that the reasons recorded and assessment so framed reasons was patently legal and secondly, no addition can be made on the ground that the cash has been withdrawal from the bank account.

The Tribunal observed that provision of section 69C of the Act can be invoked where during any financial year the assessee incurred any expenditure and failed to offer any explanation about the source of such expenditure or the explanation offered was found to be unsatisfactory by the Assessing Officer. The amount covered by such expenditure or investment, as the case may be, deemed to be the income of the assessee for such financial year.

The Tribunal further observed that the authorities below had itself recorded that the source of the amount in question was the cash withdrawals made from the bank account of the assessee. Thus, the source of the amount stood explained. There was  no finding or allegation regarding the nature of the expenditure incurred by the assessee.

The Tribunal observed that an amount withdrawn from the bank account of the assessee, the source of which is not in dispute, can not partake the character of income merely because the assessee did not explain the purpose for which such withdrawal was made. Once the source of the amount withdrawn stands duly explained, such withdrawal cannot, by itself, be treated as the income of the assessee.

Accordingly, the Tribunal directed the Assessing Officer to delete the impugned addition.

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