Cash Deposit From Prior Withdrawals a Substantiated Source: ITAT Partly Grants Relief of Rs.10.50 Lakh for Deposit During Demonetization [Read Order]

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has granted relief of Rs.10,50,000 by accepting that cash deposits during the demonetization period were sourced from prior withdrawals.

Haralur Narayana Reddy Nagaraj (assessee), an individual filed his return of income for the assessment year 2017-18, declaring a total income of Rs.2,97,290. The return was selected for limited scrutiny to examine cash deposits made during the demonetization period.

The Assessing Officer (AO) found that the assessee had deposited Rs.16,50,000 in cash into his Karnataka Bank account. The assessee explained that the deposits were made from cash withdrawn earlier from the same account.

The AO rejected this claim, citing a lack of documentary evidence. The AO added Rs.13,52,710 to the assessee’s income, determining the total income at Rs.16,50,000 in the assessment order. Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)].

The assessee relied on the same bank statements used by the AO, submitting a summary of cash deposits and withdrawals to demonstrate that the deposits were sourced from prior withdrawals.

The CIT(A)dismissed the appeal and observed that the bank statements constituted additional evidence and that no application for admitting such evidence was filed. The CIT(A) refused to consider the bank statements and upheld the AO’s addition.

Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The counsel for the assessee, argued that no additional evidence was submitted, as the bank statements relied upon were the same ones used by the AO to make the addition.

The counsel contended that the CIT(A)’s dismissal on the grounds of additional evidence was erroneous. The counsel submitted that the cash deposits were fully explained by prior withdrawals and requested that the addition be deleted.

The single-member bench comprising Shri Prashant Maharishi, Vice President, observed that the AO had obtained the bank statements directly from Karnataka Bank and used them to make the addition.

The tribunal held that the assessee’s reliance on the same bank statements did not constitute additional evidence. The tribunal observed that the assessee had withdrawn Rs.10,00,000 on 26.05.2016 and Rs.50,000 on 11.12.2016 and 19.11.2016, totaling Rs.10,50,000 in cash withdrawals.

The tribunal held that in the absence of evidence that the withdrawn cash was used for purposes other than the deposits, the assessee was entitled to credit for the Rs.10,50,000 withdrawn.

The tribunal granted relief of Rs.10,50,000, reducing the addition to Rs.3,02,710, which remained unsubstantiated and therefore it was confirmed. The appeal was partly allowed for statistical purposes.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates