SRINIVASAIAH CHANDRA SHEKAR GOWDA,BENGALURU vs. INCOME TAX OFFICER, WARD NO - 5(3)(2), BENGALURU

IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT ITA No.:2272/Bang/2025 Assessment Year : 2017-2018 Srinivasaiah Chandra Shekar Gowda No. 9/1,4thmain,Netaji Nagar, Income Tax Officer, Ward Mathikere, Bengaluru-560054 No. – 5(3)(2) Vs. Karnataka PAN:AJRPC1790P APPELLANT RESPONDENT

Assessee by : Shri Balram Rao Advocate : Ganesh R Ghale, Advocate Standing Revenue by Counsel for Revenue

Date of Hearing : 03-03-2026 Date of Pronouncement : 18-05-2026 ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT 1. ITA No. 2272/Bang/2025 is filed by Srinivasaiah Chandra Shekar Gowda for assessment year 2017-18 against the appellate order passed by the Joint Commissioner of Income Tax Appeals Faridabad (the learned CIT-A) for assessment year 2017-18 dated 28th August 2025 wherein the appeal filed by the assessee against the assessment order passed under Section 143(3) of the Income Tax Act 1961 (the Act) dated 14th December 2019 passed by the Income Tax Officer Ward – 5(3)(2) Bangalore (the learned Assessing Officer) was dismissed. The assessee is in appeal.

ITA Nos.: 2272/Bang/2025 Page 2 of 6 2. The fact of the case shows that assessee is an individual who filed his return of income on 28th July 2017 as a total income of Rs. 10,77,888 and also claimed deduction under chapter VIA of Rs. 1,00,000. Their case of the assessee was picked up for scrutiny for verification of cash deposit during demonetization period. Notice under Section 143(2) of the Act was issued on 31st August 2018. The learned AO found that assessee has deposited cash in the bank account for which the assessee gave reply that the amount deposited during the time of demonetization was from the sources of earning from his salary income which was accumulated for purchase of plot of land in Bangalore which could not fructify in view of demonetization and therefore assessee deposited wholesome back to the bank account. The learned AO was also shown the various bank accounts. The assessee also stated that the sum was accumulated over a period of 8 years and assessee is an employee who is earning salary. The learned AO categorically noted that assessee is stated to have been in the habit of withdrawing cash from salary amount and then re-depositing it. The learned AO noted that assessee has received gross salary income of Rs. 10,77,888/- which works out Rs. 89,824/- per month and therefore assessee is well educated and employed at a responsible post in the company and therefore the submission of the assessee is incorrect. Accordingly he held that cash deposit of Rs. 12,49,500/- deposited by the assessee is treated as unexplained investment accordingly the total income was assessed at Rs. 22,27,390/- by order dated 14-12-2019. 3. The assessee challenged the same before the learned CIT-A wherein the assessee submitted that he wanted to purchase residential property and the amount withdrawn from the bank account over a period of time was given to his own person Mr. Eshwarappa. His affidavit was also furnished that he has received a sum of Rs. 12,31,000/- which was returned to him by Eshwarappa due to demonetization on 08.11.2016 and which was deposited by the

ITA Nos.: 2272/Bang/2025 Page 3 of 6 assessee in the bank account. The affidavit of Mr. Eshwarappa was also produced. The learned CIT (Appeal) noted that sources of cash deposit was Automatic Teller Machine Withdrawal since year 2014 further given to Mr. Eshwarappa is not acceptable as the assessee being well-educated person and should be aware of the fact that cash transaction in purchase of property is not acceptable. Accordingly the addition was confirmed and appeal of the assessee was dismissed. 4. The assessee preferred the appeal. The assessee submitted a paper book containing 117 pages wherein the bank statement of the assessee with other banks, his return of income, his Form No. 16 along with computation of total income was furnished for assessment year 2014-15 to assessment year 2017-18 along with the affidavit of Mr. Eshwarappa. The assessee also makes an application under Rule 29 of the Income Tax Rules wherein it has made an application for admission of additional evidences such as Permanent Account No. of Mr. Eshwarappa and his Aadhar Card. The assessee reiterated the same submissions which were made before the learned lower authorities. 5. The learned Departmental Representative vehemently submitted that the story concocted by the assessee is not acceptable. The assessee has made partly withdrawals which could not be used for depositing the wholesome of Rs. 12,49,500/-. The learned Departmental Representative relied upon the decision of the SMC Bench Banglore in ITA No. 705/bang/2022 for assessment year 2017-18 in case of Shri. Keshav Murthy dated 28-11-2023 wherein on identical facts and circumstances the small withdrawals made by the assessee were not held to be correct source of cash deposit during demonetization period. Similarly the decision of Delhi Bench SMC in ITA No. 1423/Delhi/2020 for assessment year 2017-18 in case of Smt. Leela Devi dated 01-02- 2021 was also relied upon wherein the assessee failed to explain the source of cash deposit in her bank account during demonetization period.

ITA Nos.: 2272/Bang/2025 Page 4 of 6 6. I have carefully considered the rival contention and perused the orders of learned lower authorities. The facts clearly shows that the assessee is an individual earning salary from a Private Limited Company, regularly assessed to Income Tax. At the time of demonetization the assessee has deposited a sum of Rs. 12,49,500/- in his savings bank account with City Bank Account No. 6819. The claim of the assessee is that above sum is an accumulated withdrawal in cash disclosed in the bank statement which was given to one acquaintance Mr. Eshwarappa to purchase a plot of land. Mr. Eshwarappa has furnished an affidavit narrating the above facts and stated that he has received the cash and subsequently because of demonetization, he has returned the above cash which was deposited by the assessee in the bank account. To support the above fact assessee has also submitted the Permanent Bank Account No. and Aadhar Card of the above person. We find that the learned lower authorities have denied the fact that a small withdrawal over a period of 3-4 years time who do not have been the source of fund deposited in the bank account of the assessee at one stroke at the time of demonetization. It is also the claim that a person who is well-versed with the banking transaction, educated could not have used the small withdrawals for deposit in the bank account. The learned DR has also relied upon the decision of Shri. Keshav Murthy supra wherein the assessee withdrew a sum of small amounts from various ATMs of different locations which have been used for making a huge deposit cash during demonetization wherein the coordinate bench has confirmed the addition. We find that in that case the withdrawals made by the assessee are Rs. 300/- on some occasion and average withdrawal was Rs. 1000/-. The withdrawals were made from ATM at various locations. The assessee could not explain where and how the alleged cash was kept and therefore the addition was confirmed. Here the assessee has given the details of the name of the person along with his Permanent Account No. Therefore the decision relied upon by the learned DR could not be applied. Further the

ITA Nos.: 2272/Bang/2025 Page 5 of 6 withdrawal was made by the father of the assessee in that case and the assessee was outside India. Further the decision relied upon of Leela Devi who does not have any income except income from house property and income from other sources who deposited Rs. 15,00,000/- during demonetization period wherein the amount withdrawn by the assessee from the amount for settlement of the matrimonial dispute was not believed to be the right source of cash deposit. 7. In the present case Mr. Eshwarappa has filed an affidavit who knows the assessee from past 11 years and he has also confirmed that he is taking the advice from Mr. Eshwarappaby depositing the small sums with him, has he is in the line of real estate for investment of any immovable property. It is categorically stated that a sum of Rs. 12,31,000/- is returned by him which was received by him since 2014 to 8th November 2016 and the same money was deposited by the assessee in the bank account. No doubt the bank account submitted by the assessee shows withdrawal of Rs. 1000/- and also the withdrawal of Rs. 20,000/- also from the bank account. The withdrawal made is also in quick succession. Therefore it is apparent that the source of money to be deposited in the bank account provided the same is not spent for any other purposes. 8. The learned lower authorities did not consider what could have been the household expenditure of the assessee and out of that what could have been saved and given to Mr. Eshwarappa. The affidavit filed by Mr. Eshwarappa was ignored. The finding that as assessee is educated, he could not have deposited the amount withdrawn from the same bank account is devoid of merit because of Income Tax Act does not make any distinction between an educated person and an uneducated person. The provisions of Section 69 also do not speak about the same. 9. In view of the above facts we restore the whole appeal back to the file of the learned Assessing Officer with direction to the assessee to

ITA Nos.: 2272/Bang/2025 Page 6 of 6 substantiate by submitting a cash flow statement about the cash available for depositing in the bank account of the assessee coupled with the affidavit of Mr. Eshwarappa. 10. The learned AO may examine the submission of the assessee and if the amount of cash available in the hands of the assessee does not have any other evidence to have been spent other than depositing in the bank account, the addition may not be made. 11. Accordingly the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 18th May, 2026.

Sd/- (PRASHANT MAHARISHI) VICE-PRESIDENT Bangalore, Dated, the 18th May, 2026. *VM* Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. CIT(A) By order

Assistant Registrar, ITAT, Bangalore