LOKENDRA KUMAR GAUTAM,MATHURA vs. ITO WARD, 1(3)(2), MATHURA
Facts
The assessee, a pan masala and zarda businessman, deposited Rs. 1.24 crore in cash during the demonetization period, claiming it was re-deposited from earlier withdrawals from the same bank account. The Assessing Officer treated this as unexplained cash credit under Section 68, which the CIT(Appeals) upheld.
Held
The tribunal held that the assessee had satisfactorily explained the source of the cash deposits as re-deposits from earlier withdrawals, supported by bank statements and cash book, which were not rejected by the AO. The revenue failed to provide evidence that the cash was used for non-business purposes or was from undisclosed sources.
Key Issues
Whether cash deposits made during demonetization, explained as re-deposits from earlier withdrawals from the same business account, can be treated as unexplained cash credit under Section 68 of the Income-tax Act.
Sections Cited
Section 68, Section 115BBE, Section 143(3), Section 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI S. RIFAUR RAHMAN & SHRI SUNIL KUMAR SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No. 335/Agr/2025 Assessment Year: 2017-18
Lokendra Kumar Gautam, F- Vs. Income-tax Officer, 109, Sector-3, Phase-2, Ward 1(3)(2), Mathura. Chaitanya Vihar,Vrindavan, Mathura. PAN : AGRPG3670K (Appellant) (Respondent)
Assessee by Sh. Pankaj Gargh, Advocate Department by Sh. Shailendra Srivastava, Sr. DR
Date of hearing 16.12.2025 Date of pronouncement 15.01.2026
ORDER PER : SUNIL KUMAR SINGH, JUDICIAL MEMBER:
This appeal has been preferred by assessee against the impugned order dated 29.05.2025 passed in Appeal No.
CIT(APPEALS)- 1, Agra/10410/2019-20 by the Ld. Commissioner of Income-tax (Appeals), NFAC, Delhi u/s. 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year
2017-18, wherein the ld. CIT(Appeals) has dismissed assessee’s first appeal.
ITA No.335/Agr/2025
Briefly stating, the facts are that the assessee is an individual,
engaged in the business of manufacturing and trading of Pan Masala
and Zarda as proprietor of M/s Radha Rani Enterprises. The assessee
e-filed his return of income on 03.11.2017 for the relevant assessment
year, declaring nil income. Case was selected for complete scrutiny
under CASS on account of cash deposits during demonetization period
and abnormal increase in such cash deposits as compared to pre-
demonetization period. During the demonetization period (09.11.2016
to 31.12.2016), the assessee deposited cash amounting to
Rs.1,23,00,000/- in his current account No. 502000086068050
maintained with HDFC Bank. This amount was withdrawn in the month
of July & August, 2016 and was re-deposited in the same account upon
declaration of demonetization period. The amount was deposited in
the bank account on account of business exigencies and uncertainty
arising out of demonetisation. It was further explained that the
appellant assessee had realized the amounts from his sundry debtors
through banking channels and the business of the assessee was in
financial stress. Creditors and other parties were making undue
pressure for recovery of their funds , hence, he decided to withdraw the
amount from bank and later on deposited again in the month of
November, 2016 due to demonetization and made payments to the 2 | P a g e
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creditors of assessee. The assessee had furnished cash book for FY
2016-17, bank statements, and details of sundry debtors and sundry
creditors along with the copy of application submitted before the
Commercial Tax Department, wherein it was stated that the assessee’s
business was closed on 31.10.2016. The Assessing Officer rejected
the explanation of the assessee and treated the entire cash deposit as
unexplained cash credit under section 68 of the Act, and made addition
of Rs.1,24,00,000/- u/s. 68 of the Act, vide assessment order dated
20.12.2019 passed u/s. 143(3) of the Act.
Assessee preferred first appeal before the ld. CIT(Appeals), who
dismissed the appeal with the observations that the assessee could not
explain the source of cash deposit in the bank account satisfactorily.
Assessee has filed this second appeal on the ground that Ld.
CIT(Appeals) has erred in confirming the addition of Rs.1,24,00,000/-
made by Assessing Officer u/s. 68 r.w.s. 115BBE of the Act, ignoring
the submissions of assessee supported by documentary evidences,
explaining the source of cash deposit during the demonetization period.
Perused the records. Heard learned representative for
appellant/assessee and learned DR for revenue.
Learned Authorized Representative for the assessee has
submitted that the assessee was a regular businessman engaged in 3 | P a g e
ITA No.335/Agr/2025
the manufacturing and trading of Pan Masala and Zarda under the
name and style of M/s. Radha Rani Enterprises. The cash amount of
Rs.1,18,00,000/- was deposited on 12.11.2016 and Rs.5,00,000/- was
deposited on 19.11.2016 in the current bank account and Rs.1,00,000/-
was deposited in HDFC saving bank account No. 03271930015712 on
12.11.2016. Out of these withdrawals, a sum of Rs.1,23,00,000/- was
subsequently re-deposited into the same bank account during
November 2016, consequent upon the announcement of
demonetization. The source of the cash deposits stood fully explained,
being re-deposits, out of earlier withdrawals made from the same
disclosed business bank account. The assessee had duly produced the
cash book for the relevant year, bank statements, details of business
debtors and creditors, as well as ledger accounts of parties to whom
payments were made through banking channels. No defects
whatsoever were pointed out by the Assessing Officer in the books of
account or in the cash book maintained by the assessee. It was
emphasized that the revenue authorities failed to bring on record any
cogent material or evidence to establish that the cash withdrawn from
the said bank account had been utilized by the assessee for any
purpose other than business or that the said cash was not available
with the assessee on the dates of its redeposit in the same bank 4 | P a g e
ITA No.335/Agr/2025
account. In the absence of any such adverse finding, the presumption
that the cash re-deposited emanated from unexplained sources is
wholly unwarranted. Therefore, it was contended that the addition
made under section 68 of the Income-tax Act, 1961 is legally
unsustainable, as cash deposits arising out of explained and disclosed
withdrawals cannot be treated as unexplained cash credits. The
Learned AR further submitted that an amount of Rs.1,00,000/- was
deposited during the demonetization period in the assessee’s savings
bank account with HDFC Bank, which was sourced out of the
assessee’s personal savings, and hence does not warrant any adverse
inference. The reliance was placed on various judicial precedents,
including the decision of the ITAT, Mumbai Bench in Ajit Bapu Satam
vs. DCIT (ITA No. 1599/Mum/2021, order dated 29.08.2022) and the
decision of the ITAT, Bangalore Bench in Veena Makam Nandakumar
vs. ITO, 2024 (5) TMI 532, wherein it has been held that re-deposit of
cash out of explained withdrawals from the bank cannot be brought to
tax under section 68 of the Act.
Learned DR for revenue supported the orders of the authorities
below and submitted that since the source of cash deposits amounting
to Rs.1,24,00,000/- was not properly explained by the assessee, the
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learned CIT(Appeals) has rightly sustained the addition made u/s. 68 of
the Act.
It is an undisputed fact that the assessee was engaged in the
business of manufacturing and trading of Pan Masala and Zarda
through his proprietary concern, M/s Radha Rani Enterprises before he
closed his business on 31.10.2016. The assessee filed the return of
income along with audited books of account, including the balance
sheet, profit and loss account, tax audit report, bank statements, and a
cash book maintained on a day-to-day basis. The Assessing Officer
has neither rejected the books of account nor pointed out any defect
therein.
The cash deposits aggregating to Rs.1,23,00,000/- were made in
the assessee’s HDFC Bank current account during November 2016.
The assessee consistently explained that these deposits were made
out of cash withdrawn earlier from the same bank account during July
and August 2016. These withdrawals are duly reflected in the bank
statements as well as in the cash book. The availability of cash on the
respective dates of deposit is clearly borne out from the cash book and
has not been controverted by the Assessing Officer by bringing any
adverse material on record.
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It is further observed that the revenue has failed to negate the
explanation of the assessee that the cash deposits were sourced from
earlier withdrawals, which in turn emanated from the sale proceeds
realized by assessee. The assessee’s sales amounting to
Rs.4,04,53,486/- have been duly disclosed and not doubted by the
Assessing Officer. Once the sales are accepted and the books of
account are not rejected, the corresponding entries in the cash book
cannot be disbelieved in the absence of any adverse material.
We also note that the Assessing Officer has not brought any
evidence to establish that the cash withdrawn during July and August
2016 was utilized for any non-business purpose, nor has it been shown
that the cash was not available with the assessee at the time of
redeposit or that the amount represented income from any undisclosed
source. We also find that no adverse inference has been drawn by the
authorities below against the explanation of assessee that deposit of
Rs.1,00,000/- was made in his saving bank account out of personal
savings.
The legal position is well settled that section 68 of the Act cannot
be invoked where the assessee has satisfactorily explained the source
of cash deposits and such explanation remains uncontroverted by
material evidence. Merely because the assessee carried out business 7 | P a g e
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transactions before and after the demonetization period does not go to
negate the explanation of cash re-deposit. The coordinate Bench of
ITAT Mumbai in Ajit Bapu Satam (supra) found no reason to sustain
the addition made by the lower authorities, particularly when both cash
withdrawal and deposit are duly substantiated from the bank statement
of the very same branch. Similarly, ITAT Bangalore Bench in Veena
Makam Nandakumar (supra) has observed that once the assessee has
explained the source of deposit as having been sourced from the
withdrawls from the bank account, it was not open to the revenue to
examine as to what assessee did with that money and cannot chose to
disbelieve the plea of the assessee merely on surmises.
That apart, the business decisions such as withdrawal and
redeposit of cash, timing of payments to creditors, or suspension or
resumption of business activities fall within the domain of commercial
expediency and in such matters, the Assessing Officer cannot
substitute his own business judgment unless the transactions are
proved to be sham or non-genuine, which is not the case here.
In the absence of any incriminating material once the source of
cash deposits stands satisfactorily explained, the addition made under
section 68 is not sustainable. Accordingly, the addition of
Rs.1,24,00,000/- made by the Assessing Officer under section 68 read 8 | P a g e
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with section 115BBE is liable to be deleted. The appeal of the
assessee deserves to be allowed.
In the result, assessee’s appeal is allowed.
Order pronounced in the open court on 15.01.2026.
Sd/- Sd/- (S. RIFAUR RAHMAN) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 15.01.2026 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra
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