Prior Cash Withdrawals For Medical Treatment: ITAT Deletes ₹29.24 Lakh Cash Deposit Addition [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) has deleted the addition of Rs. 29,24,571, which was sustained by the Commissioner of Income Tax (Appeals) [CIT(A)] as unexplained cash deposits under Section 69A read with Section 115BBE of the Income Tax Act, 1961.

Suresh Surindersing Yadav (assessee) filed his income tax return for AY 2017-18 on 31.07.2017, declaring a total income of Rs. 25,93,460. The return was selected for limited scrutiny through the Computer-Assisted Scrutiny Selection (CASS) to verify large cash deposits made during the financial year, particularly during the demonetization period.

During the assessment proceedings, the Assessing Officer (AO) observed that the assessee had deposited cash amounting to Rs. 59,67,000 in three savings bank accounts with DCB Bank, including Rs. 34,50,000 during the demonetization period.

The assessee explained that the cash deposits were sourced from prior cash withdrawals from the same bank accounts and maintained as cash in hand to meet medical emergencies due to a medical ailment.

Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here

The AO rejected the explanation and treated the entire amount as unexplained income under Section 69A read with Section 115BBE, adding Rs. 59,67,000 to the assessee’s income.

Aggrieved by the AO’s order, the assessee appealed to the CIT(A). The CIT(A) granted partial relief by accepting the availability of cash in hand amounting to Rs. 30,42,429 but sustained the addition of Rs. 29,24,571, finding the explanation for the balance amount unsatisfactory.

Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The assessee’s counsel argued that the cash deposits were made from cash withdrawals totaling Rs. 67,91,000 from DCB Bank accounts, with Rs. 29,87,000 withdrawn in the financial year 2016-17 and Rs. 38,04,000 in the preceding year.

The counsel emphasized that the assessee maintained significant cash in hand for medical emergencies, supported by bank statements, and that there was no evidence to suggest the withdrawn cash was utilized elsewhere.

The two-member bench, comprising Narendra Kumar Billaiya (Accountant Member) and Sandeep Singh Karhail (Judicial Member), observed that the assessee had withdrawn Rs. 67,91,000 from DCB Bank accounts, which exceeded the cash deposits of Rs. 59,67,000.

The Tribunal noted that the lower authorities had not provided any findings to demonstrate that the withdrawn cash was used for purposes other than the stated medical emergencies. It deleted the balance addition of Rs. 29,24,571 by accepting the assessee’s explanation.

The Tribunal also dismissed the ground related to the initiation of penalty proceedings under Section 274 read with Section 271AAC(1) as premature and noted that the ground concerning interest levied under Sections 234B, 234C, and 234D was consequential, requiring no separate adjudication. The appeal of the assessee was partly allowed.

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