There is no legal provision which compels a person to necessarily deposit/invest the cash available in hand – ITAT
In A recent judgment, ITAT Jabalpur has held that there is no legal provision which compels a person to necessarily deposit/invest the cash available in hand in bank. Keeping idle cash though may impel the Assessing Officer to take an adverse view but in the absence of any material suggesting that such amount was invested elsewhere the addition cannot be made purely on the basis of suspicion.
ABCAUS Case Law Citation:
4766 (2025) (10) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the Commissioner of Income-tax (Appeals), NFAC in confirming the addition made u/s 69A r.w.s. 115BBE of the Income Tax Act, 1961 (the Act) as unexplained money on account of cash deposited in the bank account.
The appellant assessee was a retired Government Employee. His case was selected for limited scrutiny on the issue of ‘Cash deposit during demonetization period”.
A notice u/s 143(2) of the Act was issued and served upon the assessee. In response to the notices, the assessee filed his response before the Assessing Officer but the same was not found acceptable by the Assessing Officer who made addition of Rs. 10,00,000/-.
Aggrieved by this order, the assessee preferred appeal before the CIT(A) who also sustained the addition and dismissed the appeal of the assessee.
Before the Tribunal the assessee contended that the authorities below had made addition mechanically. He further reiterated that he had deposited the amount out of the explained sources of income. It was stated by the assessee that the wife of the assessee had been doing some business and which was duly declared with the Income Tax Department.
It was further stated that the wife of the assessee expired and the cash on hand which was in her proprietary concern was deposited in the bank account of the assessee being the legal heirs of the deceased wife.
The Tribunal observed that AO in the assessment order had recorded that the immediately after deposit of amount was transferred to the account of the daughter-in-law’s proprietary concern. In this regard, the submission of the assessee before the CIT(A) was that there was sufficient time between the last date of hearing and the date of passing of the impugned assessment order. It was submitted that if the Assessing Officer was not satisfied with the explanation, he could have sought a very specific and short explanation from the assessee.
Further, it was stated by the assessee out of the total capital of assessee’s deceased wife more than half was shown as cash in hand. In support of his contentions, the assessee furnished the cash-on-hand statement, balance sheet, and death certificate of his wife. It was stated that the wife of the assessee had expired in the preceding previous year, but the said cash was kept at home and no investment was made by the assessee.
The Tribunal opined that looking to the time gap between the death of the assessee’s wife and the declaration of the demonetization period, ordinarily it would be inferred that no prudent person would keep such a substantial amount idle. However, the fact remains that the cash-on-hand was duly explained and stood in the name of the assessee’s wife. This explanation remained unrebutted.
The Tribunal also observed that there is no legal provision which compels a person to necessarily deposit/invest the cash available in hand. In fact, keeping cash idle may impel the Assessing Officer to take an adverse view but in the absence of any material suggesting that such amount was invested elsewhere the addition cannot be made purely on the basis of suspicion.
Therefore, the Tribunal opined that CIT(A) ought to have considered the explanation offered by the assessee and verified the correctness of the same but in the absence of such exercise bringing any material which could rebut the explanation of the assessee the impugned addition cannot be sustained.
The Tribunal held that the impugned addition was purely made on the basis of surmises and conjectures hence cannot be sustained.
Accordingly, the Assessing Officer was directed to delete the impugned addition and the grounds of appeal of the assessee were allowed.
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