Unless it is shown that money withdrawn from bank was utilized for some other purpose, no addition can be made merely because there was a time gap between a withdrawal and re-deposit of money
In a recent judgment, the ITAT Allahabad has held that unless the Revenue can show that money withdrawn from a bank account was utilized for some other purpose, merely because there was a time gap between a withdrawal and re-deposit of that money, could not be a ground to make an addition in this regard.
ABCAUS Case Law Citation:
4577 (2025) (05) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition on account of car purchased in cash.
The appellant/assessee was a Professor in Allahabad University. The assessee filed income tax return for the relevant Assessment Year and later revised it upwards.
The case was selected for limited scrutiny. The Assessing Officer (AO) concluded the assessment under section 144 of the Income Tax Act, 1961 (the Act). He recorded the fact, that as per the information available, the assessee had purchased an Innova Car against which substantial amount was paid in cash. It was recorded that the assessee had repeatedly been asked to submit the details of the investment, but no response had been received from the assessee in this regard. Therefore, the AO made an addition in this regard.
Before the JCIT(Appeals), the assessee submitted that she had been ill and advised by the Doctor to take bed rest therefore, she was hospitalized and was not able to contact her counsel. Hence, neither the assessee nor the counsel was able to attend the case on the dates on which the case was fixed to be heard and no other opportunity was granted and ex parte order was passed under section 144 of the Act, making the impugned addition on account of the Car.
It was submitted that there was no undisclosed income of the assessee, as she was a salaried person employed in Allahabad University as a Professor.
It was further submitted that during the year under consideration, she had been accorded a loan by SBI and subsequently she had made cash withdrawals for the purchase of Innova Car. It was submitted that the Innova Car had been purchased out of this cash withdrawal from the bank, that was explained by the loans, and by adding money from savings made from withdrawals out of her salary.
It was further submitted that there was no evidence with the ld. AO so as to cast aspersions with regard to non-disclosure of aforesaid income in the regular books of the assessee. The AO had failed to appreciate that the assessee had salary income as an employee of Allahabad University and also had been sanctioned loan by the State Bank of India. It was submitted that as a person earning Rs.15 Lacs per annum, which was reflected in form 26AS, she was even otherwise capable of buying an Innova Car from her earnings only. It was submitted that the transactions entered into by the assessee were duly reflected in her passbook and the purchase of the Innova Car had been made by the assessee out of withdrawal of cash from State Bank of India.
However, the CIT(A) went through the matter and noted that there was a gap of 18 months from the dates of cash withdrawal and the booking of the vehicle. In view of the extended period of time between the withdrawal and the purchase, he held that while the assessee had submitted that she had taken loan from State Bank of India, she had actually submitted the amount statement of HDFC. Therefore, he held that there was no link between the withdrawals and the purchase and therefore, he dismissed the appeal of the assessee.
Before the Tribunal, the assessee inter alia submitted that the CIT(A) had failed to consider that the assessee had made the booking much later, because she was awaiting the model of her choice. The CIT(A) had failed to consider that the assessee had purchased, the newly launched model of the car during this period and therefore, was under waiting.
It was further submitted that merely because the assessee had mentioned State Bank of India inadvertently, did not make the details of the loan from HDFC or the withdrawals therefrom as inaccurate.
Relying upon the judgment of the ITAT, Jaipur Bench, the assessee submitted that it had already been held that where cash deposits were preceded by cash withdrawals, the AO could not make an addition merely on the basis of conjectures.
The Tribunal observed that the basic ratio that has been laid down by the ITAT Jaipur and in so many other judgments that precede it, is that unless the Revenue can show that money withdrawn from a bank account was utilized for some other purpose, merely because there was a time lag between a withdrawal and re-deposit of that money, could not be a ground to make an addition in this regard.
The Tribunal observed that the Revenue must bring something on record to show that the cash that had been withdrawn by the assessee had been utilized elsewhere and was not available to the assessee at the time of depositing the same back or making an investment.
The Tribunal noted that in the instant case, since absolutely no compliance was made by the assessee before the AO, the ld. AO did not have any occasion to examine as to whether the assessee actually had the funds available at the time of the purchase of the Innova Car or whether the funds had been utilized elsewhere.
The Tribunal further noted that loan that was granted to the assessee by the HDFC Bank, was not for the purpose of purchase of a car, but was for investment in a house (home loan). Therefore, before it can be said that the said money was available to the assessee, the assessee would be required to furnish the details of the utilization of the home loan and the sources from which her house was constructed or alternatively the fact that her house was not constructed. If the assessee is able to demonstrate that the amount in question was not utilized in the construction / purchase of a house, then the AO cannot hold that she did not have the cash available with her, merely because of the hiatus of time.
Accordingly, the Tribunal restored the matter back to the file of the AO for determining how the housing loan of the assessee was utilized and thereafter for passing a fresh order in accordance with law. The assessee was advised to make full compliance before the AO to establish the facts of her case so that the true facts may be brought out in the assessment.
In the result, the appeal of the assessee is allowed for statistical purposes.
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