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Facts
The assessee deposited Rs. 35,13,000/- in bank accounts during the demonetization period, claiming these funds originated from prior cash withdrawals and existing cash balance. The Assessing Officer and CIT(Appeals) made an addition of Rs. 30,33,410/- under Section 69A read with Section 115BBE, treating it as unexplained income and disallowing the set-off of loss.
Held
The tribunal held that the Revenue failed to adduce any evidence to prove that the cash previously withdrawn by the assessee had been spent elsewhere. Relying on judicial precedents, the tribunal concluded that the onus was on the Revenue to prove prior expenditure, which they did not discharge, and thus deleted the addition.
Key Issues
Whether cash deposited during the demonetization period, claimed to be from prior bank withdrawals, can be treated as unexplained income under Section 69A when the Revenue fails to prove that the withdrawn cash was spent elsewhere.
Sections Cited
143(3), 69A, 115BBE
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Income Tax Appellate Tribunal, DELHI BENCH “G” DELHI
Before: SHRI ANUBHAV SHARMA & SHRI KRINWANT SAHAY
O R D E R PER: KRINWANT SAHAY, AM: The captioned appeal preferred by the assessee is directed against the order dated 30.06.2022 passed by the learned Commissioner of Income-tax (Appeals)- 27, New Delhi against the order of assessment dated 07.12.2019 for A.Y. 2017-18.
Grounds of appeal raised by the assessee are as under:
“1. That on the facts and in the circumstances of the case, learned Commissioner of Income Tax (Appeals)-27, Delhi has grossly erred both on
2. That the learned Commissioner of Income Tax (Appeals) has grossly erred in failing to appreciate that the cash deposit made in the bank account was out of the past cash withdrawal made from the bank account and hence the addition made by the Id AO was unsustainable in law.
3. That the learned Commissioner of Income Tax (Appeals) has grossly erred in observing that appellant could not provide verifiable evidence which establishes that it was having cash balance on the date of demonetization, failing to appreciate that unless there is evidence that cash in hand were utilized for any other purpose, addition made by the Id AO is unsustainable in law.
4 That the learned Commissioner of Income Tax (Appeals) has grossly erred in upholding the action of the Id AO in not allowing the set off of loss of Rs. 9,53,049/-.”
The only effective ground raised in this case is the addition on the basis of cash deposit in bank accounts during demonetization period. During the proceedings before us the learned counsel appearing for the assessee argued that whatever cash deposits were made in the bank account by the assessee during demonetization period, the entire amount was either withdrawal from the bank accounts earlier or they were available in the books of account of the assessee.
Submissions of the Appellant in proceedings before ld. CIT(Appeals) as recorded in his order are as under:
“That the instant appeal has been filed by the assessee appellant and is directed against an order of assessment dated 07.12.2019, whereby learned assessing officer has framed an order of assessment, wherein he has Sant Lal Aggarwal v. ACIT computed the income of the uppellant at Rs. 56,45,180/-as against the returned income of Rs. 16,58,720/- by making an addition of Rs. 30,33,410/- u/s 69Ar.w.s. 115BBE of the Act. Apart from the aforesaid, Id AO has also disallowed the setoff of loss of Rs. 9,53,049/- Aggrieved against the aforesaid order of the assessment, assessee has filed the instant appeal. The submissions of the assessee against the aforesaid addition made before the learned CIT(Appeals) were as under:
That the appellant is an individual and have two sons ie. Shri Gaurav Aggarwal and Shri Saurav Aggarwal. Both the sons of the appellant are major and are married. Both the sons of the appellant are separately filing their return of income since many years. Infact, appellant and his sons are residing together as joint family. It is submitted that since the both the sons of appellant are well settled and earning income, as such, all the household expenses are born by them, and out of respect, they don't allow the assessee to incur any expenses on household
2 For the year under consideration, the appellant has earned income from business from his proprietorship concern Shri Krishna Agro, capital gain, income from house property and income from other sources, and accordingly, the appellant filed his return of income on 31.12.2017 declaring an income of Rs. 16,58,720/-. Copy of the acknowledgement of return of income alongwith computation of income has been placed at pages 1-49 of PB.
3 It is submitted that the assessee maintains books of account for its proprietorship business Shri Krishna Agro and also maintain separate bank account for the same. It also maintains separate account for personal purposes. In fact, in the personal account whenever any amount is credited by way of rent, interest, etc, assessee immediately withdraw the same and keep the cash with him and is also evident from its bank account. Accordingly, assessee always keep cash with him to meet any exigency. It is submitted that just before the demonetization, the appellant was having a cash balance of Rs. 38,68,845/-, and hence after the declaration of the demonetization, the appellant out of the aforesaid cash balance, deposited a sum of Rs. 13,90,000/-in its Andhra Bank account and a sum of Rs. 21,23,000/- in Punjab National Bank account.
Sant Lal Aggarwal v. ACIT 4. In fact, after the demonetisation, the queries were raised in respect of the aforesaid cash deposit, and the appellant also filed the response wherein it was stated that cash deposited was out of cash withdrawals. Copy of the replies filed by the assessee has been placed at pages 64-75 of PB.
5. It is submitted that Id. AO did not dispute the cash withdrawal made from the bank account in the earlier years, however it was held by him that the assessee in the return has disclosed cash-in-hand as on 31st March, 2016 was Rs.14,590/-, as such, cash withdrawals made in the earlier years was rejected by him. It is submitted that in the income tax return, only the cash in hand of the proprietary business concern of the appellant was required to be disclosed, and hence cash in hand of the appellant was not mentioned in the return. In fact, if the ITR-3 filed by the assessee is read alongwith the balance sheet of the proprietary concern, it would be seen that in the balance sheet the cash and cash equivalent as on 31.03.2016 was shown at Rs. 34,699/- and in the ITR-3 for the AY 2016-17, under the head "BALANCE SHEET AS ON 31ST DAY OF MARCH, 2017 OF THE PROPRIETORY BUSINESS OR PROFESSION", a sum of Rs. 14,590/- was shown as cash in hand and a sum of Rs. 20,109/- was shown as balance with the banks. The total of the same is 34,699/- which is reflected in the balance sheet under the head Cash and cash. Equivalents. Similarly in the ITR-3 for the AY 2017-18, "BALANCE SHEET AS ON 31ST DAY OF MARCH, 2017 OF THE PROPRIETORY BUSINESS OR PROFESSION", a sum of Rs. 2,61,358/ was shown as cash in hand and a sum of Rs. 89,749/- was shown as balance with the banks. The total of the same is 3,51,107/- which is reflected in the balance sheet under the head Cash and cash Equivalents. It is therefore submitted that the assumption of the Id AG that the assessee has cash balance of Rs. 14,590/- is wholly erroneous. Infact, from the perusal of the cash book of the assessee drawn on the basis of the bank statements, it would he seen that assessee has opening cash balance of Rs. 34,00,295 and not Rs. 14,590/- as has been assumed by the assessee.
Further to the aforesaid, it is submitted that learned AO merely adopted the cash withdrawal made from the bank account from 01.04.2016 till 08.11.2016 of Rs. 9,65,000/- and out of the aforesaid sum, it was held by him that considering the status of the assessee, learned AO assumed that assessee must have expended Rs. 70,000/- per month towards maintenance of his livelihood & therefore, it is held by the learned AO that Rs 5,00,000/- has been utilized for maintenance of assessee's personal expenses for last
7. It is submitted that aforesaid finding of the learned AO is wholly erroneous. It is submitted that firstly, the assessee has tendency of keeping cash with him by withdrawing the same from his bank account and as on 08.11.2016, the appellant was having a cash balance of Rs. 38,68,845/-. Further, as submitted above, the appellant resides alongwith his sons who are major and earning income which was also shown in their return of income and since all the household expenses are born by them, as such the appellant don't have to incur any expenditure as such, assumption that the appellant has spent a sum of Rs. 5,00,000/- towards his maintenance is erroneous. Infact from the perusal of the cash book, it would be seen that the appellant has shown drawing/expense of Rs. 69,950/- for his personal expenses and apart from the aforesaid no further sum was spent by the appellant for his personal needs, and hence the assumption of the Id AO that the appellant has spent a sum of Rs. 5,00,000/-towards his maintenance is erroneous.
It is submitted that there is no material or any adverse information against the assessee which shows the assessee had utilized the cash available with it on account of the withdrawal made from the bank account. It is submitted that there is no provision in the Income Tax Act requiring that cash withdrawn/available with an assessee, if remains unutilized, has to be redeposited immediately. [ITO v. Baburao K. Paisal [IT Appeal No. 6091/Mum/2012 dated 22-12-2014]. It is further submitted that in the case of CIT v. K. Sreedharan [1993] 201 ITR 1010 (Ker.) it was held that non- spending of money during the period between the date of the withdrawal of the amount and the date of its later deposit is a negative fact and hence, the Revenue can't ask the assessee to bring forth positive evidence regarding the non-spending of such amount(s). In other words, the Revenue can't place the negative onus on the assessee in this regard. [Rajiv Chandran v. ITO 2019- TIOL-231-ITAT-DEL). It is further submitted that learned AO has made the impugned addition as unexplained cash u/s 69A of the Act failing to appreciate that such sum has been deposited in the bank account of the appellant and appellant has also offered an explanation which was supported by the documentary evidences as such, no addition can be made under section 69A of the Act.
Sant Lal Aggarwal v. ACIT 9. It is further submitted that admittedly assessee has regularly withdrawn the cash from its bank account, and as on 08.11.2016, the appellant was having cash balance of Rs. 38,68,845/- and out of the aforesaid cash, a sum of Rs. 35,13,000/- was deposited during the demonetization period. It is submitted that merely because there is some time gap between the receipt of cash and date of deposit of cash, no adverse inference can be drawn against the assessee without any adverse material. Reliance is placed on the following judicial pronouncements: i. Smt. Saroj Sirselewalavs. ITO reported in [1993] 45 TT) 701 (JP) ii. ACIT vs. Baldev Raj Charla reported in [2009] 121 TTJ 366 (Delhi) iii. Muon Computing P. Ltd. vs. ITO [ITA No. 7606/Del/2019 dated 04/08/2021] iv. Smt. Veena Awasthi, dated 30/11/2018 v.R.K. Dave v/s ITO reported in 94 TT) 19
The appellant seeks to place reliance on the order of the Hon'ble Tribunal in the case of Shri. Vipin Aggarwal vs. ITO (ITA NO. 2571/Del/2018 dated 19.02.2019) (see page 30-38 of PB), wherein it was held that unless there is evidence to show that the amount withdrawn from the Banks have been spent by assessee somewhere else, explanation that cash withdrawn has been used to deposit in the bank account cannot be rejected. In the case of DCIT Vs Smt. Veena Awasthi (TA No.215/LKW/2016 dated 30.11.2018), it was held that addition made by the Id AO merely on the ground that assessee made frequent withdrawal and deposit of his own money was not justified as the same was not prohibited under any law.
It is submitted that while making the impugned addition, learned AO did not bring any evidence to rebut the evidences furnished by the assessee and made the addition on suspicion and speculations. It is settled law that, no addition can be made on the basis of surmises, suspicion and conjectures. Reliance for this proposition is placed on 37 ITR 271 (SC) Uma Charan Shaw & Bros. Co. v. CIT. It has been further held in the following cases that suspicion howsoever strong cannot take the place of proof: i) 26 ITR 775 (SC) at 782 (SC) Dhakeswari Cotton Mills Ltd. vs. CIT ii) 37 ITR 151(SC) Omar Salay Mohammad Sait v CIT iii) 37 ITR 288 (SC) Lal Chand Bhagat Ambica Ram v CIT iv) AIR 1977 SC 796 Krishnand vs. State of Madhya Pradesh
12 In view of the aforesaid, it is submitted with respect since the appellant has made the cash deposits out of the sale of the properties as such, addition made by the learned AO purely on suspicion and without any material is unsustainable in law.”
Ld. CIT(A) did not accept the submissions filed by the assessee and rejected the claim of withdrawal of money by the assessee from bank accounts. As per ld. CIT(Appeals) no prudent businessman will withdraw the money from bank to keep it in his house as claimed by the assessee. The relevant finding of ld. CIT(Appeals) as recorded in para 10 of his order are as under:
“10. Appellant has taken the plea that he likes to keep cash with him rather than in Bank. Applying the concept of preponderance of probability, this is not logical why a person should withdraw the cash and keep it with him particularly when he is living in big city like Delhi where banking facility is available at short distances. He is also active on internet banking. Moreover, he is a businessman and turn over of his companies are in hundreds of crores and therefore he understands the importance of banking.”
During proceedings before us the learned counsel appearing for the assessee argued that many judicial pronouncements made by the higher judicial bodies accepted that it is not the business of the revenue to question the withdrawal of money by the assessee and keeping it in his house. The only thing that revenue is required to prove is that the money so withdrawn earlier was spent somewhere else. In this case the Revenue could not prove that money withdrawn in earlier years were spent by the assessee somewhere else. Therefore, the claim of the the demonetization period in its bank account ought to be accepted.
6. Per contra, ld. CIT (DR) relied on the orders of authorities below.
We have considered the findings given by the Assessing Officer and the ld. CIT(Appeals) and we find that Revenue could not bring on record any evidence that money withdrawn at earlier occasions by the assessee were spent somewhere else and that it was not kept by the assessee at his residence. Therefore, keeping in view various judicial pronouncements as cited above we are inclined to delete the impugned addition and allow the appeal of the assessee. Accordingly, assessee’s appeal on this ground is allowed.
Order pronounced in open court on 30.09.2025.