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Facts
The assessee, a HUF, deposited Rs. 27 lakhs cash during the demonetization period in Assessment Year 2017-18. The Assessing Officer added Rs. 6.40 lakhs as unexplained cash under Section 69A, asserting a gap between withdrawals and redeposit and rejecting the opening cash balance. The CIT(A) upheld this addition.
Held
The Tribunal held that once evidence of bank withdrawals is furnished, the purpose cannot be questioned. It noted that the AO accepted current year withdrawals but ignored previous year withdrawals which contributed to the opening cash balance. Finding that the assessee had sufficient funds, the Tribunal directed the deletion of the Rs. 6.40 lakhs addition.
Key Issues
Whether the income tax authorities were justified in making an addition under Section 69A for cash deposits during demonetization by disregarding the assessee's opening cash balance derived from prior bank withdrawals.
Sections Cited
143(2), 142(1), 69A, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “A” BENCH: HYDERABAD BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA.No.403/Hyd./2025 Assessment Year 2017-2018 Pingle Ranadhir Reddy, The Income Tax Officer, SECUNDERABAD–500 026. vs. Ward-10(1), I.T. Towers, PAN AABHP9254N Hyderabad. Telangana. Telangana. (Appellant) (Respondent) For Assessee : MS. S. Sandhya For Revenue : Sri Gurpreet Singh, Sr. AR Date of Hearing : 23.07.2025 Date of Pronouncement : 25.07.2025 ORDER PER MANJUNATHA G. :
The above appeal has been filed by the Assessee against the Order dated 27.01.2025 of the learned Addl/JCIT(A)-11, Delhi, relating to the assessment year 2017-2018.
Brief facts of the case are that, the assessee, a HUF filed it’s return of income for the assessment year 2017-2018 on 13.07.2017, admitting total Income of 2 ITA.No.403/Hyd./2025 Rs.45,40,000/- under the Head “Other Sources”. The case was selected for Limited scrutiny under CASS to verify the issue i.e., 'Large value of cash deposited during demonetization period’. Notice u/sec.143(2) of the Income- tax Act, 1961 [in short “the Act”] dated 09.08.2018 was issued and served on the assessee. The Assessing Officer also issued notice u/sec.142(1) of the Act dated 30.01.2019 and called-upon the assessee to furnish the sources for cash deposits with supporting evidence. In response to the notice, assessee furnished written submissions stating that, his only source of income is interest on FDR's and has no business income. Further, he is holding 2 (two) bank accounts, one Bank of Baroda (BOB) OD account and another, BOB savings account. The sources for cash deposits were explained to be as withdrawals from both the accounts and cash available in hand. In support of his submissions, a cash flow statement for the financial year 2016-17 and copies of bank accounts were furnished. The Assessing Officer after verifying the documentary evidences furnished by the assessee during the course of assessment
3 ITA.No.403/Hyd./2025 proceedings, recomputed the opening balance as on 01.11.2016 at Rs.20,80,000/-, whereas the assessee has deposited Rs.27,00,000/- which is over and above the available funds in hand. Therefore, the Assessing Officer noted that, the sources for cash deposits of Rs.6,40,000/- remained unexplained. Accordingly, the Assessing Officer issued a show cause notice to the assessee to show cause as to why the excess deposited than available sources of income, should not be treated as unexplained income u/sec.69A of the Act. In response to the show cause notice, the assessee reiterated that, it is his practice to hold huge cash balance in hand which is evident from cash flow statement for the financial year 2013-2014. The assessee submitted that, the cash flow statement has shown at opening cash balance of Rs.11,24,302/-. After considering the deposits and withdrawals for the financial years 2014- 2015 and 2015-2016, the cash balance available in hand as on 01.04.2016 is of Rs.7,12,153/-. Therefore, the assessee requested to consider the cash in hand and subsequent withdrawals from bank as the sources for the cash
4 ITA.No.403/Hyd./2025 deposited during the demonetization period and to drop the addition u/s.69A of the Act. However, the Assessing Officer being not satisfied with the explanation of the assessee noted that, there is a gap of three months between the withdrawals and re-depositing of cash. Further, considering the cash withdrawals on various dates before demonetization, the sources for deposits of Rs.20,70,000/- were treated as explained against the total deposits of Rs.27,00,000/- and noted that, the balance amount which is over and above the available sources was at Rs.6,40,000/- which remained unexplained. Therefore, the Assessing Officer made the addition of Rs.6,40,000/- u/sec.69A r.w.s.115BBE of the Income Tax Act, 1961 as unexplained money in the hands of the assessee.
On being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A) and reiterated the submissions made before the Assessing Officer. Before the learned CIT(A) it was the submission of the assessee that, the Assessing Officer erred in not considering the opening balance as on 01.04.2016 of 5 ITA.No.403/Hyd./2025 Rs.7,12,153/- which is the closing balance of the previous year ending 31.03.2016 and, that, the assessee is having sufficient amount in his hands. Therefore, the impugned addition made by the Assessing Officer to the tune of Rs.6,40,000/- as unexplained and making addition u/sec.69A of the Act, is not sustainable in law. However, the learned CIT(A), after considering the submission of the assessee and the assessment order noted that, the assessee was failed to explain the source of cash payment. Therefore, the learned CIT(A) noted that, the assessee was failed to discharge his onus and sustained the addition made by the Assessing Officer.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
MS. S. Sandhya, Advocate-Learned Counsel for the Assessee referring to paper book submitted that, the assessee has filed cash flow statement from 01.04.2016 onwards with opening balance of Rs.7,12,153/-. However, the Assessing Officer has worked-out the cash availability without considering opening balance and has sustained
6 ITA.No.403/Hyd./2025 addition of Rs.6,40,000/- towards cash deposit into bank account. Learned Counsel for the Assessee further submitted that, the assessee has made cash deposit of Rs.27,00,000/- during the demonetization period which is out of previous cash withdrawals from 01.04.2016 to 07.11.2016 for Rs.20,60,000/-. The Assessing Officer has accepted the cash withdrawals of the current financial year, however, ignored the cash withdrawals of earlier financial year, even though, the assessee has filed relevant evidences and proved sufficient cash withdrawal is available to explain the opening balance. Therefore, she submitted that, the opening balance of cash in hand as on 01.04.2016 should be considered and addition made by the Assessing Officer should be deleted.
Sri Gurpreet Singh, learned Sr.AR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, the Assessing Officer has fairly allowed relief to the extent of cash balance out of previous withdrawals. The assessee could not explain source for opening cash in hand and, therefore, the 7 ITA.No.403/Hyd./2025 Assessing Officer has rightly made the addition and the learned CIT(A) has rightly sustained the addition made by the Assessing Officer. He submitted that, the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and the orders of the authorities below. There is no dispute with regard to the fact that, the appellant has made cash deposit of Rs.27 lakhs during the demonetization period. The appellant explained the source for cash deposit out of opening cash in hand available as on 01.11.2016 of Rs.27,72,153/- which includes opening cash balance of Rs.7,12,153/- as on 01.04.2016. The Assessing Officer has accepted the withdrawals of current financial year for Rs.20,60,000/-. However, rejected the opening cash balance of Rs.7,12,513/- on the ground that, sufficient evidence has not been filed and further, the assessee could not explain reasons as to why it has withdrawn huge cash from bank in previous financial year. In our considered view, once evidence for withdrawal of cash from bank account is furnished, the Assessing Officer cannot question
8 ITA.No.403/Hyd./2025 the purpose of said withdrawal. Further, the assessee has filed relevant bank statements and as per the said evidences, we find that there are sufficient cash withdrawals even in earlier financial years. Therefore, in our considered view, once the Assessing Officer has accepted the cash withdrawals of current financial year, he ought to have accepted the cash withdrawals in earlier financial years which is source for opening cash in hand of Rs.7,12,153/-. If we consider the opening cash in hand of Rs.7,12,153/-, then, the assessee is having sufficient cash as on 01.11.2016 for Rs.27,72,153/- to explain the cash deposit of Rs.27 lakhs on 17.11.2016 i.e., during the demonetization period. The Assessing Officer without appreciating the relevant facts, has simply made the addition towards cash deposit of Rs.6,40,000/- as unexplained money u/sec.69A of the Act. The learned CIT(A) without considering the relevant facts, has simply sustained the addition made by the Assessing Officer. Thus, we set- aside the order of the learned CIT(A) and direct the 9 ITA.No.403/Hyd./2025 Assessing Officer to delete the addition of Rs.6,40,000/- towards cash deposit into bank account.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open Court on 25.07.2025.