RAJEEV MAHINDRU,LUDHIANA vs. DEPUTY COMMISSIONER OF INCOME TAX,CC-3, LUDHIANA

However, the Ld. CIT(A) confirmed the addition on the ground that the explanation offered was not supported by documentary evidence and the assessee failed to establish a direct nexus between the cash withdrawal and the subsequent deposit.

Now the assessee is before us on the grounds mentioned hereinbefore.

Before us, the Ld. AR submitted that the lower authorities failed to appreciate the fact that the cash deposit of ₹50,000/- was duly explained as being out of withdrawals made from the bank in the earlier financial year. It was submitted that the cash flow statement covering Financial Years 2018–19 to 2020–21 was placed on record, which clearly demonstrated the availability of sufficient cash in hand. It was further argued that the assessee is not maintaining books of account, and the deposit in question was within the reasonable financial capacity of the assessee. It was also emphasised that no addition had been made in earlier assessments for similar withdrawals and the Department had accepted the past cash position. Reliance was placed on principles of consistency and judicial discipline, submitting that once withdrawals are established, the onus shifts to the Revenue to prove that such cash was not available. It was contended that the addition was unjustified both in fact and in law and deserves to be deleted.

On the other hand, the Ld. Sr. Departmental Representative supported the findings of the authorities below and submitted that the explanation furnished by the assessee lacked credibility. It was argued that a gap of more than 15 months between withdrawal and redeposit raises serious doubts about the genuineness of the explanation. It was submitted that no documentary evidence, such as cash book, contemporaneous records, or corroborative entries was furnished to establish the continuity of cash in hand. The Revenue emphasised that the cash flow statement filed was unaudited and self-prepared, and thus, could not be relied upon to explain the source of deposit. It was thus prayed that the addition made under section 69/69A, being justified in the facts of the case, should be sustained.

We have heard the rival contentions and perused the record. The only issue involved in the present appeal is whether the cash deposit of ₹50,000/- made by the assessee in March 2021 can be treated as explained. From the material placed on record, it is evident that the assessee had made cash withdrawals in the earlier financial year, which have not been disputed. A cash flow statement demonstrating the availability of cash on hand was also submitted during the assessment proceedings. Though the deposit was made after a gap of time, there is no finding by the Assessing Officer that the cash so withdrawn was utilised elsewhere or was not available with the assessee.

In our considered view, once the source of the funds has been established and the withdrawals from bank account are not in dispute, the benefit of the doubt must go in favour of the assessee, particularly when the amount involved is nominal. The assessee is not found to be engaged in any undisclosed business activity. The principles of preponderance of probabilities, as laid down in several judicial pronouncements, support the explanation offered by the assessee.

The Hon’ble Punjab & Haryana High Court, in similar circumstances, has held that a cash deposit cannot be disbelieved merely because of the time gap between withdrawal and deposit, and further held that withdrawals made even four years earlier cannot be presumed to be unavailable at the time of subsequent deposit, in the absence of any evidence to the contrary. The legal position is clear that once the assessee discharges the initial onus of showing the source of cash deposit, the burden shifts to the Revenue to disprove the explanation with positive evidence, which is lacking in the present case.

The amount involved in the present case is relatively small. The assessee has filed detailed cash flow workings, backed by bank statements, and there is no evidence on record to suggest any attempt to conceal income. Given the facts of the case and the settled legal position laid down by the jurisdictional High Court, we are of the considered view that the assessee has satisfactorily explained the cash deposit of ₹50,000/-, and the addition made under section 69/69A is unsustainable.

Accordingly, we direct deletion of the impugned addition. The addition of ₹50,000/- solely on account of the time gap, in absence of contrary evidence, is not justified.

We, therefore, hold that the assessee has satisfactorily explained the source of the cash deposit and the addition made under section 69/69A is liable to be deleted.