Mere earlier withdrawals no basis for explaining subsequent cash deposited in bank – ITAT

Merely cash withdrawals at one point of time cannot be a sole basis for explaining the cash deposit in future. ITAT upheld additions u/s 69.

ABCAUS Case Law Citation:
ABCAUS 2681 (2018) (12) ITAT

Important Case Laws Cited/relied upon:

The instant appeal had been filed by the assessee against the order of the Commissioner of Income Tax (Appeals) whereby the CIT(A) upheld addition made on account of unexplained cash found deposited in the bank account of the assessee under the provisions of section 69 of the Income Tax At, 1961 (the Act).

During the assessment proceedings, the AO noticed that the assessee had deposited huge cash in her bank account in the relevant previous year.

On being asked to furnish the source of the same, the assessee contended that it was attributable to her opening cash in hand and furnished a copy of cash book for the relevant financial year showing opening balance of cash.

The assessee was asked to justify the opening balance to which, it was submitted that cash in hand was on account of cash withdrawn by her in the preceding year, for purpose of investment, which was not made due to lack of investment opportunities and thus remained as such with her.

The AO did not find explanation of the assessee plausible since he noted that the assessee had raised loans and also withdrawn cash numerous times thereafter, which was not needed if she already had so much cash in hand, and had deposited cash in three installments which again defied logic, that too after a period of 8-9 months.

Hence, the AO made the impugned addition on account of unexplained deposits, to the returned income of the assessee.

The CIT(A) held that the circumstances as brought out by the AO clearly showed that the explanation of the assessee was not plausible and that the totality of the circumstances showed that the withdrawal attributed by the assessee to the opening cash in hand was not actually available with assessee so as to justify the cash deposited.

Before the Tribunal, the assessee contended that the addition had been made u/s 69 of the Act as per which only additions on account of unexplained investment could be made and since in the present case no investment had been made by the assessee, the addition made was not sustainable in law.

The Tribunal rejected the above contention of the assessee as without any merit. The Tribunal held that undisputedly, the addition was related to cash found deposited in the bank of the assessee which is equivalent to an investment made by the assessee and, therefore, there is no error of law having occurred by making the impugned addition u/s 69 of the Act which deals with unexplained investments.

The assessee has challenged the addition on merits. The assessee reiterated that the source of cash deposited in the bank was from the withdrawals made from her bank account in the preceding year and the fact that the same was deposited after 8-9 months did not make any difference.

The Tribunal noted that as per the findings of the Assessing Officer (AO), the cash withdrawal which was attributed to having been retained by the assessee and deposited in the impugned year, was 8-9 months old and though the assessee had claimed that the same was kept by her in the form of cash in hand, it was noted that despite such huge amount of cash available with her she had taken loans thereafter and even made further withdrawals from the bank of substantial amounts.

Moreover, the CIT(A) had noted that the assessee had claimed that the amount had been withdrawn for making investment and since the investment did not materialize the same was re-deposited, but the deposit was made in a staggered manner over a period of three months. None of the facts as pointed out by the lower authorities had been controverted by the assessee. Further no explanation for the above had been given even before the Bench.

Therefore the Tribunal agreed with the CIT(A) that the explanation of the assessee did not appear to be plausible.

The Tribunal concurred with the CIT(A) in that merely making cash withdrawals at one point of time cannot be a sole basis for explaining the cash deposit in future. It is the totality of all the facts and circumstances which is to be considered and thereafter a plausible view to be taken on the issue. The Tribunal held that the assessee had been unable to offer to justify the cash deposits. Accordingly the appeal was dismissed

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