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Facts
Cash of Rs. 15,70,940/- was seized from the assessee during a search. The assessee claimed the cash was withdrawn from bank accounts for urgent medical needs. The Assessing Officer and CIT(A) added the amount as unexplained.
Held
The Tribunal held that the Assessing Officer and CIT(A) arbitrarily made the addition without verifying the bank withdrawal details. The assessee had provided bank statements showing sufficient withdrawals to cover the seized cash.
Key Issues
Whether the cash found and seized from the assessee can be treated as unexplained income when the assessee provided bank statements showing withdrawals for medical emergencies?
Sections Cited
250, 69A, 144, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘SMC’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.
PER VIJAY PAL RAO, VICE PRESIDENT :
This appeal by the Assessee is directed against the Order dated 06.06.2025 of the learned CIT(A), Hyderabad-11, Hyderabad, for the assessment year 2019-2020.
The assessee has raised the following grounds of appeal :
2 ITA.No.1318/Hyd./2025 1. The order of the Ld. CIT (A) u/s 250 of the Act dt. 06/06/2025 for the AY 2019-20 is erroneous both on facts and in law to the extent the order is prejudicial to the interests of the appellant.
2. The Ld. CIT (A) erred in dismissing the appeal without considering the fact that the amounts withdrawn in the bank accounts of himself and his wife and kept with the appellant for his urgent medical needs.
The Ld. CIT (A) failed to appreciate the fact that the withdrawals from bank accounts of the appellant and his spouse are the sources for the availability of the cash of Rs.15,70,940/-as at the time of search conducted on 03-12-2018, which amount was kept for urgent medical needs of the appellant for which the appellant submitted copies of bank accounts of himself and his wife.
4. The Ld. CIT (A) ought not to have dismissed the appeal on the ground concluded that the sources for the availability of cash of Rs.15,70,940/- is unexplained in the absence of evidence/proof for the credits made in their Bank account, for which the Ld. CIT(A) had no jurisdiction to hold that source to the source was not explained.
5. The Ld. CIT (A) ought to have considered that the addition made Rs.15,70,940/- u/s 69A of the Act by the AO cannot be sustained on the ground that the appellant has not explained the sources for the deposits in their Bank accounts, before withdrawal and ought to have deleted the said addition.
6. Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”
3 ITA.No.1318/Hyd./2025 3. At the outset, we find that this is second round of appeal as earlier this Tribunal vide Order dated 11.10.2022 in ITA.No.242/Hyd./2022 remanded the matter to the record of the Assessing Officer with a direction to grant the assessee one opportunity to substantiate his case by filing requisite details and decide the issue as per law. The learned Authorised Representative of the Assessee has submitted that in the set-aside proceedings the Assessing Officer has not considered the source of cash of Rs.15,79,940/- found and seized on 03.12.2018 by the Police as the earlier withdrawals from the bank account of the assessee as well as wife of the assessee. The learned Authorised Representative of the Assessee has submitted that the assessee has filed the statement of the bank account of the assessee showing the transactions of the withdrawals of the amount which was more than sufficient to show the availability of the said amount of cash as on the date of seizure by the Police. Since at the time of original assessment proceedings the assessee could not file the relevant documents and the order was passed ex-parte u/sec.144, therefore, the Tribunal in the first
4 ITA.No.1318/Hyd./2025 round of appeal remanded the matter to the record of the Assessing Officer for considering the evidence to be filed by the assessee. The learned Authorised Representative of the Assessee has also given the details of the withdrawals made by the assessee as well as his wife from the bank accounts amounting to Rs.21,30,000/- which was ignored by the Assessing Officer as well as the learned CIT(A) while passing the impugned orders.
On the other hand, the learned DR has submitted that the assessee has failed to produce any evidence to explain the source and particularly, a direct link of the withdrawal of the amount from the bank account and the cash found at the time of seizure by the Police. He has relied upon the orders of the authorities below.
We have considered the rival submissions as well as the relevant material on record. In the course of the checking by the Police Authorities, cash of Rs.15,70,940/- was found and seized on 03.12.2018 at the premises of the assessee. The Assessing Officer while passing the assessment u/sec.144 made the said addition to the total income of the 5 ITA.No.1318/Hyd./2025 assessee as the assessee could not explain the source of the said cash. The matter was carried to this Tribunal, and this Tribunal vide order dated 11.10.2022 remanded the matter back to the record of the Assessing Officer by recording the explanation of the assessee that the cash so found and seized was withdrawn from the bank account of the assessee and his spouse for medical emergency. For giving the assessee an opportunity to substantiate his case by filing the requisite details, the matter was remanded to the record of the Assessing Officer and to decide the issue as per law. The Assessing Officer while passing the order in the remand proceedings has reiterated the addition in Paras-9 to 11 as under :
“9. In response, the assessee submitted that Hon'ble ITAT had clearly mentioned that the source of cash found is out of cash withdrawals and Hon'ble ITAT has directed to verify the same. He further submitted that during the course of current proceedings, he had already given the details of withdrawals by providing the bank statements of himself and his wife Smt. Anita Chavan and further submitted that withdrawal was made for medical emergency.
The reply furnish by the assessee is considered. The Hon'ble ITAT has nowhere held that the source of cash found is out
6 ITA.No.1318/Hyd./2025 of cash withdrawals as contended by the assessee. The decision of the Hon'ble ITAT is reproduced as under "It is the submission of the learned Counsel for the assessee that the assessment was completed u/s 144 of the I.T. Act and given an opportunity, the assessee is in a position to substantiate the availability of such cash so found and seized which is out of the withdrawals from the Bank A/c of self and his spouse which were for medical emergency. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to grant one final opportunity to the assessee to substantiate his case by filing requisite details and decide the issue as per fact and law.” It can be seen from the above, that the Hon'ble ITAT has nowhere held that the cash found and seized was from the cash withdrawals. If that was the case, the Hon'ble ITAT would have fully allowed the appeal. Hence, the contention of the assessee is wrong. The assessee did not file the return of income, nor responded to the notices issued during the original assessment proceedings. During assessment proceedings, the verification has to be done in entirety and not just to a limited extent as desired by the assessee. The assessee was asked to substantiate the sources for the cash withdrawals made, i.e., the sources for the credits in the bank account, out of which cash withdrawals were made. Further, the assessee was asked to submit evidence in support of the claim that cash deposits were made out of earlier cash withdrawals. The Hon'ble ITAT has directed the assessee to substantiate his case by filing requisite details. Instead of following the orders of the Hon'ble ITAT, the assessee has submitted that the Hon'ble ITAT held that the cash seized is out of 7 ITA.No.1318/Hyd./2025 earlier cash withdrawals. The assessee merely submitted copy of bank statement and has not submitted any explanation to the nature of credits in his bank accounts out of which cash withdrawals were made and also failed to submit evidence in support of the claim that cash deposits have been made out of earlier cash withdrawals as there is a time gap between the cash withdrawals and the cash seizure, and there are certain cash deposits in the bank account as well. Further, A plain reading of order of ITAT clarifies that it is at the behest of the Assessee that the case is set aside to the file of this office with an aim to provide an opportunity to the Assessee to substantiate his claim. However, the assessee again failed to establish his claim before the Assessing Officer with any tangible evidence and explanation that was needed to prove his case as indicated by Hon'ble ITAT.
In view of the above, it is held that the assessee has failed to substantiate the sources for the cash found and seized from his possession, and hence, the cash of Rs. 15,70,940/-is treated as Unexplained Money u/s.69A, chargeable to tax as per the provisions of Sec. 1158BE and brought to tax accordingly.”
5.1. Thus, instead of verifying the details and particularly, the transaction of withdrawals of the cash from the bank account of the assessee as well as his wife, the Assessing Officer has confirmed the addition by giving the reasons that the Tribunal has nowhere held that the source of cash is found out of the cash withdrawals as contended by the 8 ITA.No.1318/Hyd./2025 assessee. Further, the Assessing Officer has stated that the assessee has failed to establish his claim with any tangible evidence and explanation that was needed to prove his case. It is pertinent to note that once the assessee has filed the bank account statements of himself as well as his wife showing the transactions of withdrawals of the cash, then, without verification/examination of these transactions of withdrawals as well as giving the finding as to how the cash withdrawals from the bank cannot be considered as source of the cash found as on the date of seizure by the Police, making the addition by the Assessing Officer ignoring the relevant details and evidence is highly arbitrary and unjustified. The learned CIT(A) has also confirmed the addition without even giving any finding on the transactions duly reflected in the bank account of the assessee as well as his wife which shows the withdrawals were more than the amount which was found at the time of seizure by the Police. Accordingly, by considering the facts which are emerging from the bank account statement of the assessee as well as his wife showing sufficient amount was withdrawn from the 9 ITA.No.1318/Hyd./2025 two bank accounts, the addition made by the Assessing Officer is not sustainable and liable to be deleted. We, therefore, set-aside the Order of the learned CIT(A) and delete the addition made by the Assessing Officer.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 19th day of December, 2025.