KHANAPUR MARALINGAPPA JAYASHREE,BANGALORE vs. INCOME TAX OFFICER, WARD-6(3)(1), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER

ITA No. 2562/Bang/2025 Assessment Year: 2017-18 Khanapur Maralingappa Jayashree, Vs. The Income Tax Officer, No.135, A 3rd Main, 9th Cross, Ward – 6(3)(1), Ganganagar, Bengaluru. Bengaluru. – 560 032. PAN – ABIPJ 6465 F APPELLANT RESPONDENT Assessee by : Shri Guruswamy, CA Revenue by : Shri Ganesh R Ghale, Advocate – Standing Counsel for Revenue Date of hearing : 02.06.2026 Date of Pronouncement : 05 .06.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

The present appeal filed by the assessee for A.Y. 2024-25 is against the order passed by the learned CIT(A) under section 250 of the Income Tax Act, 1961.

ITA No.2562/Bang/2025 Page 2 of 6 2.1 In the present case, the addition relates to cash deposited in the assessee's bank account. The assessee could not explain the source of the cash deposits to the satisfaction of the Assessing Officer (AO). Therefore, the AO treated the amount as unexplained money under section 69A of the Act and added it to the total income.

2.2 Before the learned CIT(A), the assessee explained that the cash deposits were made out of cash withdrawn in earlier years. However, the learned CIT(A) rejected this explanation. According to him, there was a long gap between the cash withdrawals and the subsequent deposits. He also observed that there was no reason for the assessee to keep such cash at home for a long period.

3.1 The learned AR submitted that the assessee had made sufficient cash withdrawals in earlier years. A cash flow statement was also filed to show that enough cash was available for making the deposits. According to the learned AR, the withdrawn cash was not used elsewhere and, therefore, remained available with the assessee.

3.2 The learned DR, on the other hand, argued that the assessee had shown withdrawals spread over a period of nearly two years. According to the learned DR, no prudent person would withdraw money from a bank and keep it idle as cash for such a long period. Therefore, he strongly supported the orders of the lower authorities.

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ITA No.2562/Bang/2025 Page 3 of 6 4. We have heard the rival submissions of both the parties and examined the materials available on record. It is true that there is a significant gap between the dates of cash withdrawals and the dates of cash deposits. It is also generally expected that a prudent person would not keep large amounts of cash at home for a long period. However, suspicion alone cannot replace evidence. The fact that the assessee kept substantial cash in hand may trigger further enquiry by the Revenue. However, the explanation of the assessee cannot be rejected merely on assumptions and without bringing any contrary materials. Once the assessee has shown that cash withdrawals were made earlier and that sufficient cash was available, the Revenue should bring evidence on record to show that such cash was spent or utilised elsewhere.

4.1 In this regard, we note that the Hon'ble Karnataka High Court in the case of S.R. Venkata Ratnam vs Commissioner of Income-Tax reported in 127 ITR 807 held that once an assessee explains the source of cash with reference to earlier withdrawals from a bank account, the explanation cannot be rejected merely on the ground that the cash was retained for a long period. The Revenue should either disprove the withdrawals or bring evidence to show that the money was not available with the assessee. The relevant extract of the order is reproduced as under: 5. There is some force in the argument of the learned counsel for the petitioner and the argument advanced by the revenue is, therefore, with out any force. Once the petitioner assessee disclosed the source as having come from the withdrawn made on a given date from a given bank, it was not for respondents Nos. 1 and 2 to concern themselves with what the assessee did with that money, i.e., whether he had kept the same in his house or uitlised the services of a bank by depositing the same. The ITO had only two choice before him. One was to reject the explanation as not believable for the reason that on his investigation on such pigmy deposit was ever made in the bank. In the alternative he ought to have called upon the assessee-petitioner to substantiate his claim by documentary evidence. Having exercised neither of the choice, it was not open to the ITO to merely surmise that it would not be probable for the assessee to keep Rs. 15,000 unutilised for a period of two years. The ITO should have given

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ITA No.2562/Bang/2025 Page 4 of 6 an opportunity to the assessee to substantiate his assertion as to the source of his capital outlay. 6. The Commissioner-1st respondent who had jurisdiction under s. 264 of the I.T. Act should have remitted the matter to the ITO with a direction to ascertain from the bank whether such a deposit was withdrawn as contended by the assessee or with the direction that the ITO should call upon the petitioner to substantiate his assertion as to the source of the capital of Rs. 15,000. Neither of the respondents having approached the problem in this manner, it cannot be said that the 1st respondent commissioner exercised his revisional jurisdiction under s. 264 of the I.T. Act judicially and properly. 7. Therefore, the impugned orders of the commissioner and the ITO are set aside. Liberty is reserved to the ITO to call upon the petitioner to substantiate his ascertain as to the source of Rs. 15,000 which he utilised as capital outlay in the year 1975, and to pass a fresh assessment order in accordance with law. Rule will accordingly issue and be made absolute. 8. There will be no order as to costs.

4.2 We also note that the Bangalore Bench of the Tribunal, in the case of Smt. Hema Ramesh in ITA No. 251/Bang/2023 dated 08.06.2023, followed the above principle and held that cash deposits made out of earlier withdrawals cannot be disbelieved merely because of the time gap between the withdrawal and deposit. The relevant extract of the order is reproduced as under:

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ITA No.2562/Bang/2025 Page 5 of 6 out any force. Once the petitioner assessee disclosed the source as having come from the withdrawn made on a given date from a given bank, it was not for respondents Nos. 1 and 2 to concern themselves with what the assessee did with that money, i.e., whether he had kept the same in his house or uitlised the services of a bank by depositing the same. The ITO had only two choice before him. One was to reject the explanation as not believable for the reason that on his investigation on such pigmy deposit was ever made in the bank. In the alternative he ought to have called upon the assessee-petitioner to substantiate his claim by documentary evidence. Having exercised neither of the choice, it was not open to the ITO to merely surmise that it would not be probable for the assessee to keep Rs. 15,000 unutilised for a period of two years. The ITO should have given an opportunity to the assessee to substantiate his assertion as to the source of his capital outlay.” 8. In the instant case, since the fact that receipt of Rs.5,50,000/- has not been doubted by the AO, I am of the view that some amount would be available with the assessee for making the impugned cash deposits. On facts of the instant case, I reasonably estimate a sum of Rs.4,00,000/- as available for making the impugned cash deposits. 9. Further, the assessee has placed on record the return of income and statement of income wherein the assessee had offered to tax a sum of Rs.2,50,000/- being sundry receipts and gifts. I am of the view that a further reduction of Rs.2,50,000/- is also required while determining the source of cash deposit. Therefore, I grant a deduction of Rs.6,50,000/- (Rs.4,00,000/- + Rs.2,50,000/-) and balance amount of Rs.2,16,000/- alone shall be brought to tax under section 69A of the Act. 9. In the result, appeal filed by the assessee is partly allowed

4.3 In the present case, the Revenue has not brought any material on record to show that the cash withdrawn by the assessee was utilised elsewhere. Therefore, the explanation offered by the assessee cannot be rejected merely on the basis of suspicion or probability. Accordingly, we hold that the addition made by the AO and sustained by the learned CIT(A) is not justified. We therefore set aside the order of the learned CIT(A) and direct the AO to delete the addition made by him. Hence, ground of appeal of the assessee is allowed.

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ITA No.2562/Bang/2025 Page 6 of 6 5. In the result, the appeal of the assessee is allowed.

Order pronounced in court on 5th day of June, 2026

Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 5th June, 2026 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order

Asst. Registrar, ITAT, Bangalore

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