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Facts
The assessee deposited Rs.15 lakhs during the demonetization period, claiming it was from prior bank withdrawals out of proceeds from a house sale in 2015. The AO and CIT(A) treated Rs.10 lakhs as unexplained credit, applying tax under Section 115BBE, doubting the feasibility of holding cash for such a long period.
Held
The Tribunal found that the assessee had sufficient bank balance and had withdrawn funds from a house sale. It ruled that the Revenue could not disbelieve the assessee's supported explanation without proving the cash was used for other purposes, deeming the Revenue's expectations improbable. The appeal was allowed, and the addition deleted.
Key Issues
Whether demonetized cash deposits, explained as re-deposits of prior withdrawals from house sale proceeds, can be treated as unexplained income under Section 115BBE. Whether Revenue authorities can reject such explanation without proving an alternative use of the withdrawn cash.
Sections Cited
115BBE, 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘SMC’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
O R D E R PER RAJPAL YADAV, VP The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) in short ‘the CIT (A)’ dated 22.08.2025 passed for assessment year 2017-18. 2. Though the assessee has taken three grounds of appeal, but his solitary grievance is that ld.CIT (Appeals) has erred in A.Y. 2017-18 2 confirming the addition of Rs.10 lacs and apply rate of tax as applicable u/s 115BBE of the Income Tax Act.
The brief facts of the case are that assessee is an employee with Tata Consultancy Services Ltd. He has income from bank interest and salary income. He has filed his return of income on 06.01.2018 declaring total income of Rs.3,54,360/-. The case of the assessee was selected for scrutiny assessment and a notice u/s 143(2) of the Act was issued and served upon the assessee. The AO was of the view that assessee has deposited Rs.15 lacs during demonetization period. Such details are noticed by the AO in paragraph No. 3, which reads as under : Date of Deposit Cash deposited Bank A/c 10/11/2016 Rs.8,50,000/- 61702010003006 Union Bank of India 18/11/2016 Rs.6,50,000/- 61702010003006 Union Bank of India Total Rs.15,00,000/- 4. The assessee has demonstrated before the AO that he has withdrawn a sum of Rs.5 lacs on 12.10.2016 and the balance amount of Rs.10 lacs was deposited out of earlier withdrawals. In order to buttress his claim, the assessee has submitted that he has sold his house at Jagadhri for a consideration of Rs.52,88,000/-. This sale was made on 30.06.2015. The sale A.Y. 2017-18 3 proceeds were deposited in the bank account. Out of that money, assessee has withdrawn Rs.20 lacs. The assessee has redeposited this money at different intervals and the remaining amount was deposited when currency was discontinued.
The ld. Revenue Authorities, namely, AO as well as CIT (Appeals) were of the view that it is not humanly possible that somebody would keep the cash of this magnitude with him for such a long period. Therefore, they have given the credit of withdrawal made by the assessee in the past and treated the sum of Rs.10 lacs as unexplained credit. The AO, thereafter, taxed this amount on the higher rate of taxation provided u/s 115BBE.
Appeal to the ld. CIT (Appeals) did not bring any relief to the assessee.
With the assistance of ld. Representative, we have gone through the record carefully. There is no dispute with regard to the fact that assessee has sufficient balance in the bank account. He has also sold house for more than Rs.52 lacs. He has withdrawn Rs.20 lacs out of those proceeds, which were A.Y. 2017-18 4 redeposited partly and balance has been deposited during demonetization period. In our opinion, the expectations of the Revenue Authorities are improbable because they have erred to assume how a particular individual will behave in particular circumstances and the individual cannot be expected to behave in a mathematical precise manner. Once a possibility is being shown that cash was available with the assessee which was withdrawn from the bank and unless it is proved by the AO that this cash withdrawal was used by the assessee for some other purpose, he cannot disbelieve the version put-forth by the assessee. He has to give credence to that possibility. Simply he cannot ignore the claim of the assessee which is supported by the banking details. Therefore, we allow the appeal of the assessee and delete the addition.
In the result, appeal of the assessee is allowed.