DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(3), BENGLURU vs. SHRI VINOD KAHSYAP, NEW DELHI

against the Commissioner of Income-tax (Appeals)-26, New Delhi’s order dated 03.03.2023 in D No. 431, DCR 100/31[case No. 10178/1920], in proceedings u/s 143(3) of the Income-tax Act, 1961, hereinafter referred to as the ‘Act’.

“6. Ground 3 and 4: These Grounds relate to addition of Rs.1,07,30,500/- on account of cash deposit in Canara bank account on various dates by the appellant during the year under consideration. During the course of assessment proceedings, the AO had asked for source of such cash deposited in the bank account. The AO held that the cash deposited was more than the cash withdrawal and household expenses, accordingly the cash book submitted by the assessee was not reliable and rejected for the limited purpose. 6.1 The Appellant had submitted that the cash deposited was out of cash in hand assessed as closing cash in hand as on 31.3.2016 considering the books of accounts/statement of affairs, during income tax proceedings u/s 143(3) of the Act on the same issue for AY 2016-17 This was out of disclosure made during search and consequent cash mobilizations. It has been submitted that the cash has been retained and reflected in the books since then. The appellant further submitted that cash deposit for the period between 01.04.2016 to 08.11.2016 was made out of same cash withdrawal and opening cash amount has been accepted and cash deposit during the period 09.11.2016 to 31.12.2016 has been added to the total income in the assessment order. The AO did not bring any evidence on record that the cash in hand was utilised by the appellant prior to deposit. 6.2 I have gone through the facts and submissions and evidences filed by the appellant. The AO had added Rs. 1,07,30,500/- simply by noting that this was unaccounted cash which was deposited in demonetized currency. From the perusal of the appellant submissions and evidences filed it is seen that that appellant had claimed the source of cash deposit in Canara Bank account of Rs. 1,07,30,500/- was out of 'assessed closing cash in hand as on 31.03.2016 totalling Rs.1,41,03,400/-. Further, in this case assessment was also made on similar issue of "cash deposit" in bank account during immediately preceding assessment year i.e. A.Y. 2016-17 by the same AO and based on the similar explanation filed during the year under consideration the then same AO has accepted the appellant's contention in its assessment order dated 22.12.2018 passed u/s 143(3) of the Act. After demonetization period, survey proceedings u/s 133A was also conducted on the business premises of the appellant on 21.03.2017. The statement of appellant was also recorded by the survey team. In the assessment order passed A.O. in Para-2 of the same has mentioned that "the survey repon uis 133A of the IT Act was submitted on 22.03.2017 to the higher suthorities and as per the survey report findings no discrepancy uced during the course of survey proceeding 6.3 The appellant further submitted that during the assessment proceedings AO queried vide letter dated 13.09.2019 about bank wise details of cash deposit in bank accounts during the year under consideration. The appellant has filed the complete details along with evidences. Thereafter on 09.11.2019 AO has further asked the appellant to give complete details of source of cash deposit of Rs.1,07,30,500/- with supportive documentary evidences. The appellant has filed his complete explanation along with evidences vide his letter dated 15.11.2019.

Thereafter on 18.12.2019, A.O. has issued final show cause notice on the above issue asking appellant to give his explanation, that why huge ideal cash was kept in hand and not deposited in bank to earn interest thereon. AO also further asked why have you not withdrawn cash from bank in the year under consideration for house hold expenses? In response to these queries, appellant has submitted his point wise explanation vide his submission letter dated 20.12.2019. In his submissions appellant has claimed that he has kept the money to cater any contingency for him and his family member and for medical purpose since appellant is a medical patient since 2003, the similar explanation was also given by appellant during the course of Survey. Appellant has also mentioned that for holding cash with him he has paid wealth tax, which is essentially a financial cost to him with no loss to revenue.

With regards to query that cash has been withdrawn from bank during the year also for household and other expenses the appellant has given his explanation that he is having big joint family and the money was kept to cater the contingencies for him and his family members and for his urgent medical emergencies as he is a medical patient since 2003. The appellant has also submitted that cash withdraws during the year was also made out of tax paid sources and simply withdrawing the money will not change the character of explained cash deposit as unexplained.

Appellant has also contended that nothing has been brought on record to justify that the cash deposited during the demonetization period in not part of cash in hand which has already been declared and assessed over the period of time and during the immediately preceding A.Y. itself.

The appellant has also relied upon the following judgments-

Hon'ble Apex Court in case of CIT vs Excel Industries Ltd. (SC) pronounced on 09.10.2013 stating the if Dept. has accepted any view the same stand should be consistently followed.

Delhi High Court in case of Omni Infoworld Pvt. Ltd. vs. DCIT Dated 23.11.2015 (Delhi ITAT) has approved the order passed by ITAT in holding that onus is on revenue to prove that the cash was not available for deposit.

Karnataka High Court in case of Principal Commissioner of Income Tax, Belagavi Vs. Basetteppa B Badami pronounced on 05.02.2018 held that where closing balance of cash in hand for preceding year was sufficient to explain cash deposited in bank in subsequent year, no addition could be made as unexplained money.

6.3 It is seen from the facts of the case discussed above that-

3. The cash in hand as on 31.03.2014 and 31.03.2015 and for the prior years the appellant had declared as taxable net wealth for AY 2014-15 and AY 2015-16 and prior years.

4. The appellant has been showing sufficient amount of cash withdrawals and personal expenses in cash, which is evident from the cash book submitted by the appellant. No adverse findings were recorded by the A.O.

Considering the facts of the case, submissions filed by the appellant and legal ruling relied upon, the appellant contention that the cash deposit was out of closing cash in hand as on 31.03.2016 of Rs. 1,41,03,400/- is accepted and addition made by AO as unexplained cash deposit of Rs. 1,07,30,500/- is therefore, deleted. Thus, the Ground Nos.- 3 & 4 of the Appeal is allowed.

We find no reason to express our concurrence with the Revenue’s stand herein seeking to revive the impugned addition of Rs. 1,07,30,500/- in principle. This is for the precise reason that the assessee duly appears to have succeeded in proving source of his cash in hand to the tune of Rs. 1,41,03,400/- as on 31.03.2016 in F.Y.

2015-16’s reassessment. The fact, however, remains that he could not plead and prove with satisfactory evidence the corresponding cash in hand right from 1.4.2016 to the date of deposits in question forming subject matter of adjudication before us. Be that as it may, we thus deem it appropriate in these peculiar facts that a lump sum addition of Rs. 2 lakhs only in the given facts would be just and proper with a rider that the same shall not be treated as a precedent. We accordingly affirm the CIT(A)’s findings deleting the impugned entire cash deposit addition of Rs. 1,07,30,500/- to the extent of Rs. 1,05,30,500/- in other words. Necessary computation shall follow.

6. So far as the assessee’s assessment u/s 115BBE is concerned, the revenue could hardly dispute that hon’ble Madras high court in SMILE Microfinance Ltd. v. ACIT in WP(MD) No. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.) has already settled the issue that Section 115BBE applies on transactions on or after 01.04.2017 only. The ld. AO is directed to ensure that the assessee shall be assessed under normal provisions qua the above addition of Rs. 2 lakhs (supra).

Order pronounced in open court on 18.08.2025.