If the source of cash deposit is withdrawal and can be proved, cash deposit cannot be added U/S 68: ITAT


If the source of cash deposit is withdrawal and can be proved, cash deposit cannot be added U/S 68: ITAT


Sunil Khaitan vs. DCIT (ITAT Kolkata)


1.  Cash deposits were made at the time of the demonetization period. Sunil Khaitan, the appellant, filed his ITR for the AY 2017-18, reporting a total income of Rs. 40,48,000/-.

2.  However, his case was appointed for scrutiny under the Computer Aided Scrutiny Selection (CASS) for verification of cash deposits in the year, specifically those made during the demonetization period.

3.  The Assessing Officer (AO) marked that Sunil Khaitan had deposited Rs. 34,18,000 in Specified Bank Notes (SBNs) at the time of demonetization. Khaitan illustrated that these cash deposits were sourced via cash withdrawals from banks and unsecured loans from different parties, and his salary income.

4.  However, through the same explanation, the AO was not satisfied and added the alleged cash deposits to the income of Khaitan.

ITAT Kolkata held as below:

1.  Khaitan had an adequate cash balance before and during demonetization, which his cash book and additional financial statements proved. It was represented that Khaitan had a cash balance of Rs. 38,81,508 available for deposit in the bank account, out of which only Rs. 31,68,000 was deposited during the demonetization.

2.  Karnataka High Court in S.R. Ventakaratnam vs CIT, held that once the taxpayer shows the funds sources as having come from withdrawals made from a bank, it is not open to the revenue to doubt this explanation established on mere surmise.

3.  Khaitan had demonstrated the source of funds utilized for the cash deposits. It carried that the revenue authorities had laid on assumptions and surmises instead of concrete proof to the contention of Khaitan’s explanation.

4.  Hence, the addition made by the AO u/s 68 was deleted, and Khaitan’s appeal was permitted.

The copy of the order is as under:

1713330718-ITA 845 Sunil Khaitan