Cash Withdrawal from NRE A/c of Son-in Law deposited during Demonetization Period Sufficiently Explained: ITAT deletes Addition of Rs. 12L [Read Order]
Merely relying on the time gap to infer alternative use was held to be presumptive and unsustainable, said the bench
The Cochin Bench of the Income Tax Appellate Tribunal (ITAT) has provided major relief to an individual taxpayer by holding that cash deposits made during the demonetization period, sourced from withdrawals from the Non-Resident External (NRE) account of her son-in-law, could not be taxed as unexplained money under Section 69A of the Income Tax Act, 1961.
The assessee, Sicily Paul, a resident of Pathanamthitta, Kerala, had filed her return of income for Assessment Year 2017-18 declaring total income of ₹4,58,660. During scrutiny, the Assessing Officer (AO) noticed cash deposits of ₹12.29 lakh in her bank account during the demonetization window and treated the same as unexplained under Section 69A, rejecting her explanation that the deposits represented past pension savings and cash withdrawn from the NRE account of her son-in-law residing abroad.
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Although proof of withdrawal from the NRE account in August-September 2016 was furnished, the AO disbelieved the claim, citing the time gap between withdrawal and redeposit. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this view, reasoning that the funds withdrawn months earlier could have been utilized elsewhere.
On further appeal, the ITAT, comprising Accountant Member Inturi Rama Rao, found merit in the assessee’s submissions.
The Tribunal noted that neither the AO nor the CIT(A) had disputed the genuineness of withdrawals from the NRE account, and no material evidence was brought on record to show that the funds were applied for any other purpose. Merely relying on the time gap to infer alternative use was held to be presumptive and unsustainable.
The Bench stated that in the absence of contrary evidence, the withdrawn amount must be deemed to be available for subsequent deposit. The assessee’s explanation was thus accepted as a plausible and credible source of the cash deposits.
Accordingly, the bench of Inturi Rama Rao (Accountant member) directed deletion of an addition of ₹12,29,365, observing that the explanation offered was reasonable, supported by evidence, and not rebutted by the Revenue.
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