Top Stories Savings A/c Cash Deposits treated as ‘Unexplained Money’ during Income Tax Assessment: ITAT Remands matter to AO [Read Order] The ITAT proceed to remit the matter back to the Assessing Officer observing the absence of relevant supporting evidence warranting addition of ‘Unexplained Money’ By Avinash Kurungot – On November 14, 2024 3:51 pm – 2 mins read

The Hyderabad Bench of the Income Tax Appellate Tribunal ( ITAT ) was recently faced with a matter wherein an Assessee’s Cash Deposits in their Savings Bank Account were treated as ‘Unexplained Money’. The ITAT proceeded to remit the matter back to the Assessing Officer ( AO ) for fresh assessment. The judgment was rendered by ITAT while jointly hearing five Income Tax Appeals filed by Ram Mohan Rapala Warangal, an assessee engaged in the business of trading in stationery items and general stores under the name and style of “Vasundhara Books Stationery & General Stores”; the Assessee had abstained from filing their return of income for the Assessment Year  ( A.Y ) 2011-12. Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The jurisdictional AO, on receipt of information received from the Investigation Wing, Unit-II, Hyderabad concluded that the Appellant-Assessee had made huge cash deposits unbeknownst to the Department, resulting in taxable “escaped income”. Appellant, upon receiving notices under Section 148 of the Income Tax Act, 1961 proceeded to file a return of income on 03.09.2018 declaring an income of Rs.3,62,500/-. However, the Respondent Assessing Officer made addition of the Assessee’s cash deposits maintained with ICICI Bank and passed Order under Section 143 of the Act, assessing the total income of the Assessee at Rs.48,46,500/-, What followed was a back and forth involving the Assessee, the Commissioner of Income Taxes (Appeals) ( CIT(A) ) and the ITAT. Thereafter, Order was passed by the CIT(A) who vitiated the Appellant’s claim by holding that the Appellant had failed to furnish requisite documentary evidence backing their claim that the cash deposits in ICICI Bank had been received by means of the business receipts of the Appellant.

A.V. Raghuram, representing the Appellant submitted before ITAT that the assessing authorities had failed to consider that the Appellant had made multiple cash withdrawals from the concerned bank accounts, resulting in the disputed cash deposits. The Hyderabad Bench of the Income Tax Appellate Tribunal presided over by Inturi Rama Rao, Accountant Member after examining the bank records affirmed that the Appellant had in fact conducted withdrawals, thus opening the avenue for subsequent deposit of the withdrawn amounts. Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here Furthermore, the ITAT held that the CIT(A) failed to adduce any evidence on record to show the Appellant’s utilization of the withdrawn amount, further widening the scope of the Assessee to re-deposit the same in the bank accounts.

Concludingly, the ITAT, being wary of the AO’s adoption of a wrong mechanism while adjudicating the Assessee’s case, remanded the matter back to the file of the Assessing Officer with the  direction that the amount withdrawn from the Bank Account by way of cash should be deemed to be available for subsequent deposit; the balance amount, if any, after being reduced by the income already returned, may be brought to tax.