ITAT Deletes Entire Rs. 59.39 Lakh Demonetisation Addition After Finding Cash Withdrawals Fully Supported

ITAT Deletes Entire Rs. 59.39 Lakh Demonetisation Addition After Finding Cash Withdrawals Fully Supported

Ajit Rameshchandra Pathak’s case was picked up for limited scrutiny for AY 2017-18 to examine large cash deposits made during the demonetisation period. The assessee had deposited ₹59,39,500 in total Rs. 43 lakh in the bank account of his late mother and Rs. 16,39,500 in his own account. The assessee demonstrated that his mother had withdrawn Rs. 45 lakh in cash between April and October 2016, all duly recorded in her cash book and corroborated by her bank statements. He maintained that the post-death deposits were made by him as a legal heir, and the funds did not belong to him personally. For his own deposits, he produced his cash book reflecting earlier withdrawals that fully explained the availability of cash.

The Assessing Officer nevertheless treated the entire amount as unexplained under Section 69A, alleging, without evidence, that the withdrawn cash “might have been spent” on renovation or other uses. The CIT(A), NFAC upheld the addition without independently examining the detailed records produced. Aggrieved, the assessee approached the ITAT.

Central Issue: Whether cash deposits totalling Rs. 59.39 lakh, supported by documented cash withdrawals of the assessee and his late mother, could be treated as unexplained under Section 69A merely on conjecture, without any adverse material or rejection of books.

Tribunal Held: The Tribunal examined the complete cash books, bank statements and reconciliation placed on record. It noted that neither the Assessing Officer nor the CIT(A) disputed the genuineness of the withdrawals of Rs. 45 lakh made by the assessee’s mother before her death. The books maintained in her name were never rejected. In such a situation, the Tribunal held, the presumption that the withdrawn cash “might have been spent” is legally untenable. Since the AO brought no evidence to show utilisation of the cash elsewhere, the availability of cash at the time of deposit must be accepted. The deposit of Rs. 43 lakh in the mother’s account, made by the assessee purely as a legal heir, stood fully explained.

For the assessee’s own deposits of Rs. 16.39 lakh, the Tribunal held that the cash flow and earlier withdrawals clearly established the availability of funds. Books were neither doubted nor found defective. Relying on several judicial precedents holding that redeposit of earlier withdrawals cannot be treated as unexplained absent contrary evidence, the Tribunal concluded that both sets of deposits were satisfactorily explained. It thus deleted the entire addition of Rs. 59,39,500 made under Section 69A and allowed the appeal in full.

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