No Addition for cash deposits in bank when sufficient cash is in hand. Assessee not supposed to tally notes withdrawn and deposited

No Addition for cash deposits in bank when sufficient cash is in hand. Assessee not supposed to keep track of notes withdrawn from bank and tally them with deposit made in bank account.

 ABCAUS Case Law Citation:
ABCAUS 2173 (2018) (01) ITAT

The Challenge/Grievance:
The instant appeal was filed by the Revenue against the order of CIT(A) deleting the addition made by the Assessing officer u/s 68 of the Income Tax Act, 1961 on account of unexplained cash deposits.

Important Case Laws Cited/relied upon by the parties:
DCIT vs. Pawan Agarwal

Assessee not supposed to keep track of notes withdrawn from bank and tally them with deposit made in bank account

Addition for cash deposits in bank

Brief Facts of the Case:
The assessment was completed u/s 144 of the Income Tax Act, 1961 making addition on account of unexplained cash deposits in the bank account(s) of the assessee. The AO noted that there were frequent huge withdrawal from the bank and simultaneously huge cash deposit in the bank account of the assessee.

The assessee filed a cash flow statement showing the availability of sufficient cash in hand for making the deposits in tha bank. The said cash flow had considered the cash withdrawals made from the banks as source of the cash.

The AO doubted it. According to him, it was beyond comprehension as to why the cash amounts were required to be withdrawn when the cash out of earlier withdrawals was available and as to why the cash was deposited again in the bank account.

According to the AO, though cash was withdrawn on different dates from bank accounts but no corroborative and contemporaneous evidences was furnished to prove that it was the cash withdrawn from the bank accounts which was subsequently deposited back in his bank accounts.

The AO opined that the withdrawals and deposits were mysterious and the statement through which the assessee sought to explain the source of cash deposits in his bank account was full of suspicious features and it cannot be relied upon as evidence.

The AO further held that if the argument of the assessee with regard to the availability of funds after making withdrawals from bank accounts was to be accepted to exclude the possibility of introduction of unexplained money as cash deposit in his bank accounts, then it had to be held that whosoever is having sufficient cash with him, then that person will not indulge into tax evasion or avoidance.

He held that mere furnishing of details of availability of funds with the assessee was not enough to prove the source of cash deposits. Mere availability of funds with the assessee was not enough to prove the source of cash deposits and it could not absolve assessee from discharging its burden of proving source of cash deposits as there was a possibility that the cash withdrawn by the assessee might have been utilized towards construction of house property and the cash was deposited from his undisclosed money.

Thus, the AO treated the amount of cash deposit as undisclosed income of the appellant and added the same.

However CIT(A) deleted the said addition. According to the CIT(A), the cash flow statement filed by the assessee had sufficient cash balance available with him before deposit in the bank accounts of the cash by him meaning thereby that the appellant had sufficient cash available so as to fund the deposit of cash made in the bank accounts.

Regarding the observation of the AO that the assessee had failed to substantiate that the amount withdrawn from one bank was subsequently deposited in bank, the CIT(A) opined observations of the AO could not be appreciated. According to the CIT(A), the assessee is not supposed to keep track of the number of respective notes which were received by him when the cash was withdrawn by him and get it tallied with the cash deposit which he is making in the same bank account or other bank account but what is to be seen is as to whether there was sufficient cash available with the assessee.

CIT concluded that it was beyond comprehension as to what type of contemporaneous and corroborative evidence the assessing officer wanted the appellant to furnish. Once the appellant had submitted proper cash flow statement the onus was shifted on the Assessing Officer to pin point any defect or mistake for rejecting the same. Rejecting the same on suspicion above is not permitted in law

Being aggrieved, The Department preferred this appeal before the Tribunal.

Contention made on behalf of the Appellant Revenue:
It was contended that the assessee had huge cash in hand and therefore, withdrawal from banks was not as per human probabilities.

It was submitted that mere furnishing of cash flow statement showing availability of cash does not itself prove that assessee had utilized same cash into his bank account which was withdrawn earlier.

Observations made by the Tribunal:
The Tribunal noted that from the findings recorded by the AO, it was apparent that he just disbelieved the cash deposits and cash withdrawal on the basis of surmises and conjectures. Nowhere he doubted the actual withdrawal and actual deposits. He merely held that is an unusual phenomenon to make withdrawal from the bank and deposit into the bank.

The ITAT concurred with the First Appellate Authority and opined that the CIT(A) had recorded complete and detailed findings and after obtaining remand report from the Assessing Officer he had allowed relief to the assessee.

Decision/ Conclusion/Held:
The penalty was cancelled.

Addition for cash deposits in bank

Download Full Judgment

----------- Similar Posts: -----------

Leave a Reply