Cash withdrawn from the bank account cannot be considered as unexplained money when the turnover was not disputed – ITAT
In a recent judgment, ITAT Jaipur deleted addition under section 69A holding that cash withdrawn from the bank account cannot be considered as unexplained money when the turnover was not disputed
ABCAUS Case Law Citation:
4498 (2025) (04) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition of unexplained money under section 69A of the Income Tax Act, 1961 (the Act) in respect of cash withdrawals made from bank account.
The assessee had not filed his Return of Income u/s 139(1) of the Act for the relevant Assessment Year and therefore, the case of the assessee was re-opened based on the provision of section 147 of the Act.
The reason for issue of that notice inter alia was that the assessee has made Cash withdrawals in current account. Thereafter an order u/s 148A(d) of the Act and a notice u/s 148 of the Act was issued and served upon the assessee by email and also shared with assessee’s e-proceedings account on department website. Subsequently, notice(s) u/s 142(1) of the Act along with detailed questionnaire were issued and served upon the assessee on various dates. The assessee furnished the ITR, Balance Sheet and profit and loss account and bank statement.
Thereafter, a show cause notice was issued to show cause as to why cash withdrawal from bank accounts should not be treated as unexplained money within the meaning of section 69A of the Act as the assessee failed to explain the deposits in the bank account corresponding to the withdrawals. In addition, the Assessing Officer (AO) also proposed to make an addition of 8 % of contract receipt as undisclosed income.
The assessee submitted that he acts as supplier of material and execution of contract work. He receives payment for that activity and the above payments/turnover receipt were credited in the bank account. The assessee also submitted a certificate of those receipts. The assessee submitted that cash withdrawn were for the purchase of materials and to meet out business expenses. It was thus submitted that out of the turnover receipts the assessee made the withdrawal and therefore, considering the provision of section 69A r.w.s.115BBE of the Ac the said withdrawal cannot be considered as unexplained money.
However, the AO noted that the assessee failed to adduce relevant document in support of expenditure incurred in cash and not by banking channel, the contention of the assessee was not accepted.
Accordingly, the AO treated the cash withdrawals from bank account as unexplained money under section 69A and made addition to the income of the assessee.
Before the Tribunal, the assessee submitted that the cash withdrawal which were coming from the disclosed sources cannot be considered as unexplained money within the provision of section 69A of the Act. The cash which was withdrawn from the bank had been duly reflected in the cash book submitted by the assessee. The transaction of withdrawal was also verifiable from the cash book and bank book placed on record and are internally verifiable. If the AO felt that the assessee could not explain the expenditure then first he had to determine which expenditure remain unexplained and even if so the same falls u/s 69C of the Act.
The Tribunal observed that the assessee had made Cash Withdrawals from current account and it was one of the reasons for issuance of notice u/s 148 of the Act to the assessee-appellant.
The Tribunal further observed that in response to the show cause notice the assessee submitted that he acts as a supplier of material and execution of contract work. He receives payment for the above payments were credited in the bank account and the certificate of the receipt of those receipts were given to the AO and all are from the Gram Panchayat. Thus, the source was not doubted by the AO and that of the CIT(A) and the assessee from that sourced receipt made the withdrawal.
The Tribunal further observed that as per provision of the section 69A of the Act when the assessee is found to be the owner of any money, bullion, jewellery or other valuable article is not recorded in the books of account maintained by the assessee and he offers no explanation about the nature and source of acquisition of the money so found be deemed to be the income of the assessee.
The Tribunal further observed that in the instant case, the assessee had explained that money which he received and found credited in the profit and loss account were received from the Gram Panchayat and the assessee after receipt of money withdraw cash for performance of the work in cash so there was no comments in the order of the lower authority but AO while making the addition noted that “basically assessee failed to adduce any relevant document in support of expenditure incurred by him in cash during the year. Further he also failed to give reasons for making the expenditure in cash and not by banking channels”.
The Tribunal noted that merely because the assessee had not filed the details of expenditure AO made the addition of cash withdrawal as unexplained money. When the matter carried before the CIT(A) he confirmed the addition stating that in the absence of any evidence to back the contention of the appellant that the entire amount was used for payment of material purchased are mere assertions devoid of merit leaving no scop for much discourse on the issue and thereby he confirmed the addition.
The Tribunal noted from the factum of the case, assessee had submitted he had as per business needs withdrawn cash from the bank which was recorded in the cash book filed. Thereafter from that cash book the assessee booked the expenditure and since that cash booked had not been disputed the cash withdrawal automatic cannot be income of the assessee.
The Tribunal held that looking to the facts of the case and explanation of the assessee supported by the evidence filed in the paper book we are of the considered view that the cash that the assessee had withdrawn from the bank account cannot be considered as unexplained money when the turnover was not disputed and thereby the AO making the addition u/s 69A deserved to be deleted.
Accordingly, the appeal of the assessee was allowed.
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