KORPU VENKATA LAKSHMI,KAKINADA vs. THE INCOME TAX OFFICER, WARD-2, KAKINADA

Brief facts of the case are that, assessee is an individual filed return of income for the A.Y. 2017-18 admitting a total income of Rs.2,57,160/- and the return was summarily processed under section 143(1) of the Act on 25.06.2018. Subsequently, the case was selected for limited scrutiny through CASS to verify “Cash deposits during the demonetization period”. Thereafter, statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. In response, assessee submitted required information through e-proceedings from time to time. On verification of the information, Ld. AO found that assessee has deposited Rs. 11,51,000/- in Allahabad Bank vide A/c.No. 50168981206 and Rs. 10,70,000/- in Bank of India vide A/c. No.863710110005130 and Rs. 4,49,000/- in Bank of India vide A/c. No.865910100002455. Assessee submitted that the deposits arise from the earlier withdrawals during the period September, 2015 out of the maturity of Fixed deposits. Assessee further explained that she has utilised Rs. 81,000/- and Rs. 20,000/- out of her personal savings during the demonetization period. After examining the bank statements and the submissions made by the assessee Ld. AO being not satisfied with the reply of the assessee proceeded to add Rs.25,70,000/- under section 69A of the Act.

On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising the following grounds of appeal: -

Ground Nos. 1 & 3 are general in nature and needs no adjudication.

Ground No. 2 is with respect to addition of Rs. 25,70,000/- under section 69A of the Act being unexplained cash deposits during demonetization period. Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that assessee has withdrawn cash out of the maturity proceeds of the fixed deposits held with Allahabad Bank and Bank of India. Further Ld.AR also submitted that assessee has accumulated agricultural income over the years to the tune of Rs. 4,49,000/-

Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] relied on the orders of the Revenue Authorities.

We have heard both the sides and perused the material available on record. On perusal of the bank statements submitted by the assessee it is noticed that assessee has withdrawn cash on 15.09.2015 an amount of Rs.9,00,000/- from Allahabad Bank, Hyderabad Maruti Nagar Branch and on 18.09.2015 an amount of Rs. 1,70,000/-. No other transaction of either cash deposits or withdrawals was available in the bank account. Similarly, an amount of Rs. 9,00,000/- and Rs.1,70,000/- was deposited by way of cash on 19.11.2016 and 21.11.2016 which was immediately transferred to the fixed deposit account.

In the similar nature, assessee has withdrawn Rs.9,00,000/- and Rs.1,50,000/- respectively on 16.09.2015 and 18.09.2015 from Bank of India, Sanjeeva Reddy Nagar Branch. Assessee has deposited Rs. 1,47,000/- during February, 2016 and Rs.9,00,000/- on 16.11.2016. Assessee has also made a deposit of Rs. 1,70,000/- on 21.11.2016 by way of cash for which corresponding withdrawals from the bank were not available.

Considering the transactions pertaining to cash withdrawals and cash deposits in the bank account, we find no major entry in the corresponding bank statements. Accordingly, the contention of the Ld.AR that the assessee has withdrawn money and kept herself without depositing into the bank deserves acceptance. Further as observed by the Ld. CIT(A) after the withdrawal during the September, 2015 assessee has not redeposited the same into the bank account till November, 2016 whereas during November, 2016 assessee made cash deposits which was immediately transferred to fixed deposits. Ld. CIT(A) contention is that assessee immediately transfers funds to the fixed deposits and hence it is impossible for the assessee to hold cash in hand for a longer period of time. However, no such cash deposits were noticed for a period of one year into the bank account of the assessee evidencing transferring the same to the Fixed Deposits accounts. Hence, we do not agree with the observations of the Ld.CIT(A). In the light of the facts and circumstances as discussed above, we are of the considered view that the assessee has substantially explained the sources of the cash deposits during the demonetization period and hence we are

In the result, appeal of the assessee is allowed.