Unexplained cash deposits in the bank account u/s. 69 – money might have been utilized in the interregnum period for some purpose and thereafter appropriated towards discharge of loan. But that fact cannot be held against the assessee

Unexplained cash deposits in the bank account u/s. 69 – Held that:- The total cash withdrawn from the bank account by the assessee was ₹ 20,91,500 + 17,71,800 which was withdrawn by his self-cheque.

There was also a deposit of ₹ 9 lakhs in the bank account in March, 2013. After excluding the cash deposit, net cash available with assessee from the withdrawals was a sum of ₹ 29,63,000. The availability of cash as a source of deposit in the bank account was disbelieved by the AO for the only reason that it was highly improbable for a person to keep withdrawals in the bank account for a period of two years.

The Hon’ble Karnataka High Court in the case of S.R. Venkataraman (1980 (8) TMI 73 – KARNATAKA HIGH COURT) had taken a view that withdrawals of cash in the past as a source of deposit at a later point of time in the bank account cannot be disbelieved merely on the surmise that it was improbable for an assessee to keep cash withdrawn for two years. Revenue authorities were not competent to dictate as to what the assessee should do with the money withdrawn from the bank. The court held that as long as the source is explained and established and if money is withdrawn from SB account and paid to discharge loan by deposit into a loan account, it is not possible to hold that the source is not explained. The Court also held that money might have been utilized in the interregnum period for some purpose and thereafter appropriated towards discharge of loan. But that fact cannot be held against the assessee. The aforesaid decision of the Hon’ble Karnataka High Court in the facts and circumstances of the present case supports the plea of the assessee.

The revenue authorities were not justified in rejecting the explanation of assessee with regard to source of deposit of cash in the bank account. The consequent addition made is directed to be deleted and the appeal of the assessee is allowed

SHRI SAMPATHRAJ RAKESH KUMAR VERSUS THE INCOME TAX OFFICER, WARD 5 (2) (2) , BANGALORE.

ITA No.1451/Bang/2018