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Facts
The assessee deposited cash in bank accounts, which the Assessing Officer deemed unexplained. The assessee claimed the source was cash withdrawals from banks, used for money lending, and declared an opening cash balance of Rs. 3,50,000. The AO and CIT(A) sustained the addition, treating the opening cash as unexplained income.
Held
The ITAT found that the cash deposits were primarily from cash withdrawals, and the difference between withdrawals, deposits, and household expenses supported the assessee's claim of money lending. Therefore, the opening cash balance could not be treated as undisclosed income for the current year, and the addition was deleted.
Key Issues
Whether the opening cash balance and subsequent cash deposits in bank accounts were adequately explained by the assessee as being sourced from prior cash withdrawals and money lending activities, or if they constituted unexplained income.
Sections Cited
Section 143(2), Section 142(1)
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Income Tax Appellate Tribunal, AGRA (SMC
Before: SHRI S. RIFAUR RAHMAN
Assessment Year: 2010-11 Sh. Abhay Benara Vs. Income Tax Officer, 1/205, Professor Colony, Hari Ward 1(1)(1), Parvat, Agra Agra PAN : ADLPB2007Q (Appellant) (Respondent) Assessee by Shri Ashish Jaiswal, Adv. Department by Shri Anil Kumar, Sr. DR Date of hearing 19.02.2026 Date of pronouncement 20.02.2026 ORDER
The assessee has filed this appeal against the order of the learned Commissioner of Income-tax (Appeals), Kanpur-04 dated 04.09.2025 for the Assessment Year 2010-11.
Brief facts of the case are assessee filed his return of income for the A.Y 2010-11 on 03.08.2010 declaring total income of Rs. 570420/-. The total income declared are from salary, house property and from other sources. The interest income consist of income from bank and income from money lending. The case was selected for scrutiny through CASS. Subsequently, notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In response, AR of the assessee attended the proceedings from time to time and submitted the relevant information as called for.
During the assessment proceeding, the Assessing Officer observed that the assessee made cash deposits in State Bank of India and ICICI Bank and frequent intervals. The assessee was asked to explain source of the same. In response the assessee submitted that the source of cash deposit is out of cash withdrawals from bank from time to time. Since the assessee lends the same to others and read opposite the same. The Assessing Officer observed from the cash flow statement submitted by the assessee, It has declared opening cash balance of Rs. 3,50,000/- when the assessee was asked to substantiate the same, it was submitted that assessee maintained cash balance of about 3,00,000/- on each day. Not convinced with the above submission the Assessing Officer sustained above said cash as unexplained cash to the total income of assessee.
Aggrieved with the above order, the assessee preferred an appeal before ld. CIT(A)-Kanpur-4. The assessee filed a detailed submissions including cash flow statement from 21.10.2005 to 31.03.2010 demonstrating the opening and closing balances of the end of each year. After considering the above, ld. CIT(A) called for the remand report from 2 | P a g e the Assessing Officer and the same is reproduced at page 10 & 11 of the impugned order. The rejoinder to the remand report submitted by the assessee is reproduced at page 12 to 15 of the impugned order, after considering the same, ld. CIT(A) sustained the addition made by the Assessing officer.
Aggrieved, the assessee is in appeal before ITAT, raising following grounds:
1 THAT THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 3,50,000.00 MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF OPENING CASH IN HAND AS UNEXPLAINED CASH. 2 THAT THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER ARBITRARILY WITHOUT COSNIDERING THE CASH FLOW STATEMENT FILED BEFORE THEM. 3 THAT THE APPELLANT CRAVES LEAVE TO INTRODUCE, MODIFY OR WITHDRAW ANY GROUND OF APPEAL WITH YOUR HONOURS KIND PERMISSION.
6. At the time of hearing, ld. AR of the assessee brought to my notice detail submissions submitted before First Appellate Authority and made similar submissions has submitted before ld. CIT(A).
On the other hand, ld. DR relied on the findings of lower authorities.
Considered the rival submissions and material placed on record. I observe that the assessee has made cash deposit in his bank account and in order to verify the same the Assessing Officer asked the assessee the submit the relevant details. After considering the cash flow statement submitted by the assessee. The Assessing Officer observed that assessee has declared opening cash balance of Rs. 3,50,000/- and not convinced with submission of the assessee on carrying in such cash balance in hand. He proceeded to make the above cash in hand as undisclosed income. After considering the submissions of both parties, I noticed from the cash flow statement submitted for the period 01.04.2009 to 31.03.2010, the assessee has withdrawn cash from State Bank of India, ICICI Bank to the extent of Rs. 32.04 lakhs and deposited Rs. 25.75 lakhs, out of cash withdrawn assessee has utilized Rs. 2.24 lakhs toward household expenses. I observe that the difference between cash withdrawals and cash deposit plus household expenses is about Rs. 5.05 lakhs excess. Since the cash deposit is out of cash withdrawals made by the assessee, it matches with the submission made by the assessee that he lends money to others out of cash in hand. In my considered view the Assessing Officer proceeded to treat the opening cash in hand as undisclosed income, the cash deposit are out of cash withdrawals, that being the case, the opening cash balance cannot be treated as income from the years under 4 | P a g e consideration. Therefore, the addition made by the Assessing Officer is accordingly deleted. In the result grounds raised by the assessee are allowed.
In the result, appeal filed by the assessee is allowed.