VAIBHAV AGARWAL,KANPUR vs. ITO, WARD-2(2)(1), KANPUR

This appeal has been preferred by the Assessee against the order dated25.09.2023, passed by the National Faceless appeal Centre, Delhi (NFAC) for Assessment Year 2017-18. 2.0
The brief facts of the case are that the assessee e-filed his return of income for the year under consideration on 21.07.2017, declaring total income of Rs.2,91,140/-. The case of the assessee was selected for scrutiny under CASS. The Assessing Officer (AO) noticed that the assessee had made cash deposits to the tune of Rs.12,25,500/- on 07.12.2016, i.e. during demonetization period, in his Bank account No.20138557546
maintained with Bank of Maharashtra, Kakadeo Branch, Kanpur.
The AO issued statutory notices and required the assessee to explain the source of the said cash deposits. The submission of ITA No.345/LKW/2023 Page 2 of 7

the assessee before the AO was that “During the demonetization period (09.11.2016 to 30.12.2016), I had deposited an Amount of Rs.12,25,500/-(Rupees Twelve lac Twenty Five Thousand Five
Hundred Only) in my Account No.20138557546 held Bank of Maharashtra, Kakadeo Branch, Kanpur. Such amount was deposited out of cash withdrawn by me on 09.06.2016 from my
Account No. 31227141489 held with State Bank of India because the denominations of currency held by me were Rs.500 and Rs.1000. Further, I am enclosing my response to Cash
Transactions 2016 as Annexure-3 for your consideration." From the details furnished by the assessee, the AO noticed that the assessee had withdrawn an amount of Rs.20,00,000/- on 09.06.2016 from his Bank account Nо.31227141489 maintained with State Bank of India, Kakadeo Branch, Kanpur. The AO noted that in support of source of fund, the assessee had submitted copies of 'Agreement to Sell’ ‘Lease Deed’ and ‘Hire
Purchase Agreement’. The AO further noticed that there was a credit of Rs.34,00,000/- on 04.05.2016 in his Bank account No.
31227141489 maintained with State Bank of India, Kanpur and the assessee had withdrawn a sum of Rs.20,00,000/- on 09.06.2016 from his Bank account maintained with State Bank of India's. After taking into account all these facts and after considering the submissions of the assessee, the AO was of the ITA No.345/LKW/2023 Page 3 of 7

view that there was a gap of 7 months between the deposit and withdrawal and, therefore, the AO treated the same as unaccounted money of the assessee and added the same to the income of the assessee under section 69A of the Income Tax Act,
1961 (hereinafter called “the Act’). The AO completed the assessment under section 143(3) of the Act, assessing the total income of the assessee at Rs.15,16,640/-.
2.1
The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under section 271AAC of the Act, separately.
2.2
Aggrieved, the Assessee preferred an appeal before the NFAC, which dismissed the appeal of the assessee and confirmed the order of the AO.
2.3
Now, the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:
1. Because the CIT(A) has erred on facts and in law in disbelieving the explanation furnished by the assessee with respect to deposit of Rs.12,25,500/- u/s 69A, deposited in bank out of the withdrawals of Rs.20,00,000/- made by the assessee from its own bank accounts, the addition made is contrary to facts in law and be deleted.
2. Because the CIT(A) has erred on facts and in law in upholding the addition of Rs.12,25,500/- made u/s 69A by ITA No.345/LKW/2023 Page 4 of 7

the AO, which addition is contrary to facts, bad in law, be deleted.
3. Because the CIT(A) has failed to appreciate that the AO has not brought any material on record but has only assumed, that the explanation furnished by the assessee is against the human probabilities, though the explanation furnished has neither found to be false, untrue or debatable, mere disbelieving the explanation and upholding the addition made by the AO is both factually incorrect, legally unsustainable, the addition made be deleted.
4. Because the CIT(A) has erred on facts and in law in upholding the applicability of provisions of section 115BBE, which provisions are not applicable, the tax calculated and levied thereon be deleted.
5. Because on a proper consideration of the facts, it would be found that the provisions of section 69A are not applicable in as much as, the same are applicable to money, bullion, jewellery or valuable articles for which the assessee fails to offer satisfactory explanations and not to investment made,
(the deposit in bank is investment), the addition made be deleted.
3.0
The Ld. Authorized Representative for the assessee (Ld.
A.R.) submitted that the issue in dispute was the source of cash deposit during the period of demonetization. It was submitted that it had been explained before the AO as well as before the Ld.
First Appellate Authority that the cash deposit was out of cash withdrawn from his savings bank account to the tune of Rs.20
lakhs on 09.06.2016 for the purpose of making payment to DIC.

ITA No.345/LKW/2023 Page 5 of 7

It was submitted that the assessee had received Rs.34 lakhs as advance for sale against his ancestral industrial property and further that it was clearly mentioned in the registered Agreement to Sell that the assessee had to get the mutation done and once the mutation had been competed, then only the property would be transferred. It was submitted that out of the withdrawal of Rs.20 lakhs, Rs.6,00,932/- had already been deposited with DIC vide challan, whereas other mutation related work was taking time and meanwhile the demonetization was announced by the Government, as a result of which the assessee had no option but to re-deposit the amount so withdrawn. It was submitted that the assessee’s explanation was rejected without pointing out any specific reason for rejecting the same and further that the said rejection was based only on the preponderance of probability. It was further submitted that there was nothing on record to counter the assessee’s explanation that the cash deposited was out of cash withdrawn. My attention was also drawn to Bank
Statement of assessee’s account with State Bank of India to demonstrate that the assessee had withdrawn Rs.20 lakhs in cash on 09.06.2016. It was prayed that the appeal of the assessee be allowed.
4.0
Per contra, the Ld. Sr. D.R. placed reliance on the observations of the AO as contained in paragraphs 3 and 4 of the ITA No.345/LKW/2023 Page 6 of 7

assessment order as well paragraphs 4.2 to 4.7 of the order of the Ld. First Appellate Authority and it was submitted by the Ld.
Sr. D.R. that the assessee had failed to offer proper explanation for keeping large amount of cash in hand and that the probability would suggest that the assessee had already utilized the withdrawn amount for some other purposes and had later on introduced his unaccounted money after declaration of demonetization. The Ld. Sr. D.R. prayed that the appeal of the assessee be dismissed.
5.0
I have heard the rival submissions and have also perused the material on record. The fact that the assessee had withdrawn an amount of Rs.20 lakhs on 09.06.2016 is not in dispute. The assessee has explained that the amount had been withdrawn for payment to DIC related to the sale of property after formalities of mutation were completed. The assessee has also explained that part payment had been made to the DIC by the assessee out of the said withdrawal. The lower authorities have disbelieved the explanation of the assessee only on the ground that the assessee could not have kept large amount of cash in hand from June to December, 2016. The lower authorities have relied simply on preponderance of probability in holding that it was highly improbable for a person to keep such huge amount of cash in hand. All the same, it is also a fact on record that ITA No.345/LKW/2023 Page 7 of 7

rejection of explanation of the assessee is not backed by any sound reasoning or logic or any evidence to the contrary. If the explanation of the assessee was to be disbelieved, then the Department should have brought on record some concrete evidence to demonstrate that the explanation of the assessee was false or untrue and merely disbelieving the explanation of the assessee, in my considered opinion, cannot be a cause for making the impugned addition. Accordingly, I set aside the order of the Ld. First Appellate Authority and direct deletion of the impugned addition.
6.0
In the final result, the appeal of the assessee stands allowed.

Order pronounced in the open Court on 25/09/2025. [SUDHANSHU SRIVASTAVA]

JUDICIAL MEMBER
DATED:25/09/2025
JJ: