Past savings can be a valid source of cash deposits unless proven otherwise by the Department – ITAT
In a recent judgment, Lucknow ITAT has deleted addition made under section 69 towards cash deposited in bank account holding that past savings can be a valid source of cash deposits unless proven otherwise by the Department. Once the assessee explains the source of deposits, the onus shifts to the AO to prove that such explanation is incorrect or unsatisfactory.
ABCAUS Case Law Citation:
4488 (2025) (03) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition under section 69 of the Income Tax Act, 1961 (the Act) made by the Assessing Officer (AO) treating cash deposited in bank account as unexplained credits.
The assessee e-filed his return of income for the year under consideration. The case of the assessee was selected for scrutiny under CASS. During the course of assessment proceedings, in response to the queries raised by the AO with respect to the source of the cash deposited by him in his savings bank account, the assessee submitted was that cash was deposited out of his and his wife’s past savings.
Not being satisfied with the reply furnished by the assessee, the AO treated the amount of cash deposited in bank account as unexplained cash deposits and added the same to the income of the assessee under section 69A of the Act.
The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under section 271AAC of the Act, separately.
Aggrieved, the assessee preferred an appeal before the First Appellate Authority who dismissed the appeal of the assessee, observing that the assessee failed to satisfactorily explain the source of cash deposits and that the assessee could not file any satisfactory explanation backed by supporting evidence during the appellate proceedings.
Before the Tribunal the assessee submitted that he was a retired Government employee and that while explaining the source of income, it was stated before the authorities below that the amount of cash was deposited in the joint Bank Account of the assessee and his wife.
It was further submitted that the wife of the assessee, had withdrawn cash from her another Bank Account which was kept in home for some future investments, but could not be invested, as no suitable opportunity was found.
It was also submitted that the assessee had disclosed his both the Bank accounts while filing the return of income and that the amounts accumulated in his bank accounts were from pension received by him. The authorities below had failed to appreciate the full and correct facts of the case and made/confirmed the addition irrationally, which is unwarranted and, therefore, the same may be deleted.
The Tribunal observed that the assessee was a retired Government servant and earned income from pension. Since the assessee had earns regular income from pension, the claim of the assessee that the deposits were from past savings, ought to have been believed in absence of any evidence to the contrary. The AO had not brought on record anything to disprove the claim of the assessee that the deposit was from his past savings or had made any allegation about undisclosed expenditure/investment.
The Tribunal observed that the AO must have concrete reasons based on evidence to reject the assessee’s explanation. If the assessee has provided a reasonable explanation, mere disbelief or suspicion is not sufficient to make an addition under the Income Tax Act. Once the assessee explains the source of deposits, the onus shifts to the AO to prove that such explanation is incorrect or unsatisfactory. If the AO has not brought any contrary evidence to disprove the claim, the addition is unwarranted.
The Tribunal further observed that there are several judicial rulings where Hon’ble Courts have held that past savings can be a valid source of deposits unless proven otherwise by the Department.
Accordingly, the addition made by the AO and sustained by the CIT(A)was quashed.
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