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Facts
The assessee deposited a sum of Rs. 25,04,000/- in cash during the demonetization period. She explained that the cash was withdrawn earlier for renovation of her house, but the renovation did not materialize due to disagreements among floor owners. The demonetization announcement left her with no option but to redeposit the withdrawn cash.
Held
The Tribunal held that the assessee had provided a proper explanation for the source of the cash deposits, which were previously withdrawn for a specific purpose that did not materialize. Therefore, these withdrawals acted as a valid cash source to explain the subsequent deposits.
Key Issues
Whether the addition made on account of cash deposits during demonetization, sourced from prior withdrawals for a non-executed renovation plan, is justified?
Sections Cited
143(3), 69A, 115BBE
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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2017-18, arises out of the order of the ld National Faceless Appeal Centre (NFAC) [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2024- 25/1074783240(1) dated 20.03.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 31.12.2019 by the Assessing Officer, ITO, Ward-12(2), Delhi (hereinafter referred to as ‘ld. AO’).
The only effective issue to be decided in this appeal is as to whether the Learned CITA was justified in confirming the addition made in the sum of Rs 25,04,000/- on account of cash deposits under section 69A read with Section 115BBE of the Act in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the materials available on record. The Assessee filed her return of income on 31-7-2017 for the assessment year 2017-18 declaring total income of Rs 16,88,110/-. During the year under consideration, the Assessee was holding following bank accounts:- a) Savings Bank Account No. 406302010041164 with Union Bank of India, Punjabi Bagh b) Savings Bank Account No. 379302010012588 with Union Bank of India, Kashmere Gate c) Savings Bank Account No. 662601700429 with ICICI Bank, Kashmere Gate
The Assessee deposited a sum of Rs. 25 lakhs on 11-11-2016 with Union Bank of India, Punjabi Bagh and Rs. 4000 on 22-11-2016 in Union Bank of India, Kashmere Gate in specified bank notes. Since these deposits fell during the demonetization period announced by the Government of India, the Assessee was asked to explain the sources for the same. The Assessee explained that the source of cash deposits emanate out of withdrawals made by the Assessee from the above bank accounts during financial years 15-16 and 16-17 on different dates. The Assessee furnished the entire bank accounts for financial years 15-16 and 16-17 before the Learned AO vide letter dated 5-8-2019. The Assessee also submitted that she is residing in third floor of a residential building situated at 190, Jor Bagh, New Delhi. She was interested in getting her house renovated and for that purpose she had withdrawn more cash when sufficient cash was available during financial year 2015-16. Since the Assessee was living on the third floor of the residential house, other floors are occupied by three other families. Each family owns one floor in the building. For renovation, quotations were invited from builders (which were also filed during the course of assessment proceedings) to renovate the entire house. Renovations, however, required temporary shifting from the house presently occupied. Some differences, therefore, arose amongst all the floor owners at the stage of negotiations with the builder. Since the renovation of the floor could not take place and moreover demonetization was announced on 8-11-2016, the Assessee was compelled to redeposit the accumulated cash in the bank account post demonetization. This explanation was not found satisfactory by the Learned AO and an addition of Rs 25,04,000/- was made under Section 69A read with Section 115BBE of the Act by the Learned AO in the assessment. This action of the Learned AO was upheld by the Learned CIT(A).
At the outset, we find that Assessee has been withdrawing cash and depositing cash in her bank account even before the demonetization period. We find that Assessee had withdrawn a sum of Rs. 46,80,000/- on various dates during financial year 2015-16 from savings bank account maintained with Union Bank of India, Punjabi Bagh and had deposited Rs. 16,50,000/- during financial year 2015-16 in the said bank. Similarly, the Assessee had withdrawn a sum of Rs. 28,51,500/- on various dates during financial year 2015-16 from her savings bank account maintained with Union Bank of India, Kashmere Gate and had deposited a sum of Rs. 65,000/- in the said account. This goes to prove the conduct of the Assessee that Assessee has been frequently withdrawing cash and depositing cash in her bank account. Further, the Statement of Affairs of the Assessee as on 31st March 2016, which is enclosed in page 44 of the paper book, reflected cash balance of Rs. 54,41,148/- as on 31st March 2016. Hence, the fact of Assessee holding substantial cash balance in hand is proved by the previous track records. Further, the Assessee had given proper explanation behind the purpose for which she was holding substantial cash i.e., to carry out renovation of her house. Subsequently, since there was no consensus among the floor owners of the building and the negotiation with the builder failed, the proposal for carrying out the renovation got dropped. Meanwhile, the Government of India had also announced demonetization. Hence, Assessee had no other option but to deposit the cash in her bank account which were previously withdrawn and were lying with her. It is not the case of the revenue that the withdrawn cash earlier by the Assessee from her bank had been utilized for some other purpose. Hence, the earlier withdrawals for a specific purpose and said specific purpose not being executed, shall act as a cash source to explain the cash deposits made by the Assessee in her bank account. Hence, we hold that the cash deposits in the bank account stood properly explained by the Assessee in the facts and circumstances of the instant case. Hence, the addition made in the sum of Rs. 25,04,000 under Section 69A read with Section 115BBE of the Act stands hereby deleted. Accordingly, the grounds raised by the Assessee are allowed.
In the result, the appeal of the Assessee is allowed.