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2025 (5) TMI 1166 - AT - Income TaxUnexplained cash deposits in the bank account - assessee has not disclosed the purpose of withdrawal and redeposit of such entries - HELD THAT - We observed that the case of the assessee was reopened on the basis of cash deposits in its bank account and assessee has explained the sources of cash deposits. AO has accepted the same however rejected the cash deposits out of cash withdrawals. Before us assessee brought to our notice that during the year assessee has withdrawn cash of Rs. 13, 30, 000/- and re-deposited out of withdrawals. We observed that the cash withdrawals are traceable to the respective cash deposited within the intervals of one month. In our considered view there are enough cash withdrawals made by the assessee during the year and there are re-deposits traceable like cash withdrawn on 13.05.2010 and re-deposited the same on 16.06.2010 of Rs. 9, 00, 000/- and similarly other deposits. Therefore there are sufficient cash withdrawals to support the submissions of the assessee. Accordingly we are inclined to allow the grounds raised by the assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of addition under section 69A of the Act on account of unexplained cash deposits Relevant legal framework and precedents: Section 69A of the Income-tax Act empowers the AO to make additions to the income of an assessee if any amount is found credited in the books of account or deposited in a bank account and the assessee fails to satisfactorily explain the source of such amount. The burden lies on the assessee to explain the source of cash deposits to avoid such addition. The principle is well settled that if the assessee explains the source of cash deposits satisfactorily, no addition can be made. Court's interpretation and reasoning: The AO reopened the assessment under section 147 based on information from the Action Management System regarding cash deposits aggregating Rs. 19,87,000/-. The AO found that the assessee had not explained the source of these deposits and hence made the addition under section 69A. The CIT(A) upheld this addition, observing the absence of plausible explanation and proper records. Key evidence and findings: The assessee submitted that the cash deposits were made out of cash withdrawals during the year. The assessee produced a detailed chart showing dates and amounts of cash withdrawals and corresponding deposits. The withdrawals amounted to Rs. 13,30,000/- plus an opening balance of Rs. 5,17,545/-, totaling Rs. 18,47,545/-, while the deposits were Rs. 19,87,000/-. The Tribunal noted that the cash withdrawals were traceable to the deposits within intervals of about one month. Application of law to facts: The Tribunal examined the linkage between cash withdrawals and deposits and found sufficient evidence that the deposits were out of cash withdrawn earlier by the assessee. This tracing of cash withdrawals to deposits negated the AO's conclusion of unexplained cash deposits. The Tribunal relied on the principle that if the source of cash is satisfactorily explained, addition under section 69A cannot be sustained. Treatment of competing arguments: The Revenue relied on the findings of the lower authorities that the source of cash deposits was unexplained. The assessee argued that the deposits were from cash withdrawals and hence explained. The Tribunal preferred the assessee's explanation as supported by documentary evidence and the detailed chart. Conclusions: The Tribunal concluded that the cash deposits were not unexplained and hence the addition under section 69A was not justified. Issue 2: Validity of reopening assessment under section 147 of the Act Relevant legal framework and precedents: Section 147 permits reopening of assessment if the AO has reason to believe that income has escaped assessment. However, reopening must be based on tangible material and valid reasons. Jurisdictional validity is essential for reopening. Court's interpretation and reasoning: The assessee challenged the reopening on grounds of invalid jurisdiction. The Tribunal noted that the reopening was based on information from the Action Management System regarding cash deposits. This constituted tangible material to form a belief of escaped income. Key evidence and findings: The reopening was triggered by the discovery of cash deposits not disclosed in the original return. The AO issued notices under section 148 and proceeded accordingly. Application of law to facts: The Tribunal found no infirmity in the AO's jurisdiction to reopen the assessment as the information was sufficient to form a belief of escaped income. The reopening was therefore valid. Treatment of competing arguments: The assessee argued lack of jurisdiction; however, the Tribunal held that the AO's action was justified on the basis of material available. Conclusions: The reopening under section 147 was valid and not vitiated by lack of jurisdiction. Issue 3: Compliance with principles of natural justice by the CIT(A) Relevant legal framework and precedents: Principles of natural justice require that the assessee be given a reasonable opportunity to present their case before adverse orders are passed. Court's interpretation and reasoning: The assessee contended that the CIT(A) passed the order without affording reasonable opportunity. The Tribunal examined the record and found that the assessee had filed written submissions and appeared before the CIT(A). Key evidence and findings: The record showed that the assessee had responded to notices and filed submissions. There was no indication that the assessee was denied hearing or opportunity to present evidence. Application of law to facts: The Tribunal found no violation of natural justice principles by the CIT(A). Treatment of competing arguments: The Revenue refuted the claim of denial of opportunity. The Tribunal accepted the Revenue's position based on record. Conclusions: The CIT(A) complied with principles of natural justice in passing the impugned order. 3. SIGNIFICANT HOLDINGS The Tribunal held as follows: "We observed that the cash withdrawals are traceable to the respective cash deposited within the intervals of one month. In our considered view, there are enough cash withdrawals made by the assessee during the year and there are re-deposits traceable like cash withdrawn on 13.05.2010 and re-deposited the same on 16.06.2010 of Rs. 9,00,000/- and similarly other deposits. Therefore, there are sufficient cash withdrawals to support the submissions of the assessee. Accordingly, we are inclined to allow the grounds raised by the assessee." Core principles established include:
Final determinations on each issue:
Accordingly, the appeal filed by the assessee was allowed by the Tribunal.
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