DEVEN JITENDRA SHAH,MUMBAI vs. INCOME TAX OFFICER-25(2)(3), MUMBAI

The issue raised is that learned CIT(A) erred in sustaining addition of cash deposit of Rs. 20,66,010/- as unexplained credit u/s. 68 of the I.T. Act.

Brief facts of the case are that the Assessing Officer noted that there were cash deposit of Rs. 20,66,010/- in the HDFC bank account of the assessee. On an inquiry in this regard, assessee explained that deposit was made out of cash withdrawal from the bank itself and opening balance of cash. This plea was rejected by the Assessing Officer on the ground that the assessee has not explained reason for frequent withdrawals and deposits of cash in the bank account. The Assessing Officer also observed that the assessee has not linked withdrawals of cash and opening balance with the deposits made in the bank. Hence, he added the aforesaid sum as unexplained credit u/s. 68 of the Act.

Upon assessee’s appeal learned CIT(A) sustained the addition. Against the above order the assessee is in appeal before the ITAT.

I have heard both the counsel and perused the records. I find that sources of cash deposit of Rs. 20,66,010/- in HDFC bank account has been explained by the assessee as cash withdrawals from the bank itself and opening balance of cash. It is not the case of the Assessing Officer that the amount shown as withdrawals from bank and opening balance are not sufficient to cover the deposits in bank. It is also not the case that the Assessing Officer has discovered some other utilization of cash withdrawals. The Assessing Officer has rejected the assessee’s explanation only on the ground that the assessee has not given explanation for frequent withdrawal and deposits in the bank. The Assessing Officer has also observed that the assessee has not linked the deposits with the withdrawals. In my considered opinion reasons attributed by the Assessing Officer for not accepting source of cash are purely based on surmises and conjecture. It is settled law for addition solely based upon suspicion is not at all sustainable. In my considered opinion the assessee has shown adequate source for deposit in cash. The same has not been rebutted the authorities below by cogent reasoning. Hence, in the background of the aforesaid discussion and precedent, I set aside the orders of the authorities below and delete the addition.

In the result, appeal by the assessee stands allowed.