Taxpayer Substantiates Cash Deposit Source with Sufficient Evidence: ITAT Deletes Addition of 28 lakhs [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled in favor of the taxpayer, deleting an addition of 28 lakhs after the taxpayer successfully substantiated the source of a cash deposit with sufficient evidence.

 The G A Advisory Private Limited company engaged in valuation of tangible and intangible assets of different clients including Government & semi Government clients and the accounts of the assessee are regularly maintained and are audited as per statutory provisions.

The assessee had declared income of Rs.55, 15,180/- on the basis of books of accounts maintained in regular business, which were also subject to audit. The Assessing Officer noted that the assessee has deposited Rs. 28 lakhs in the bank accounts on 19.11.2016, i.e., during the period from 09.11.2016 to 13.12.2016. The AO required the assessee to file further details by way of notice dated 02.12.2019 issued under Section 142(1) of the Income Tax Act.

The assessee submitted that cash of Rs.28 lakhs was deposited on 19.11.2016 out of cash withdrawn from ICICI Bank from 03.09.2016 to 04.11.2016 and in support; the assessee also filed bank statement of ICICI bank. Accordingly, the source of cash was out of own money withdrawn from the bank account. 

The Assessing Officer issued a show-cause notice as sources and funds are not incorporated. The assessee again reiterated that the same and the same were out of withdrawal made by the ICICI bank. The assessee also submitted that the assessee was searching for a property for purchase and he also placed a copy of loan document dated 11.11.2016, which was a principal approval though without mentioning of specific property. Since, the assessee had withdrawn cash at that time purchase of property which could not be materialized. Therefore, post demonetization, the assessee has deposited the same amount. However, the Assessing Officer did not accept the submission of the assessee and added Rs.28 lakhs under Section 68 of the Income Tax Act.

The Commissioner of Income Tax (Appeals) on analysis of withdrawn cash and cash deposits in the bank account of the assessee for FYs 2015-16, 2016- 17 and 2017-18 revealed that the assessee has never deposited any significant amount of cash in the bank account during any other period except during the demonetization period and business model of the assessee revealed that no receipts are received in cash by the assessee and no significant payments have been made in cash

The two member bench of the tribunal comprising Balaganesh (Accountant member) and Amit Shukla (Judicial member) found that the assessee had shown cash withdrawals from its bank account which remains part of cash-in-hand of the assessee in the books. Since, it is a corporate entity and therefore, it had maintained regular books of accounts in regular course, wherein, the assessee has disclosed the cash withdrawals and the cash in hand in the regular books of accounts. The assessee has explained the source of cash deposits from out of cash in hand representing earlier cash withdrawals two months ago for which the assessee had adduced sufficient evidence.

Even though, the assessee might have given the statement that cash withdrawal was for the purpose of buying a property, however, the fact remains that even if the explanation was plausible or not but fact of the matter is that, once there was cash withdrawal and cash in hand has been declared in the books, and if post demonetization the same has been deposited, it cannot be held that the same was undisclosed sources. Thus, the addition confirmed by the CIT (A) was deleted accordingly, the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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