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November 4, 2022

Cash deposit and withdrawals in equal amounts – telescoping benefit is allowed by ITAT

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

Cash deposit and withdrawals in equal amounts – Telescoping Benefit is allowed by ITAT

Facts and Issues of the Case

The assessee has raised following grounds of appeal:-

1. “That selection of appellant’s case under limited scrutiny is void-ab- initio being rule 114-E read with Form No.61A for scrutiny cases, applicable for cash deposit more than Rs. 10,00,000/- in saving A/c and not to cash deposit of more than Rs. 10,00,000/- in cash- credit/current account.

2. That ld. CIT(A) wrongly ignored, that the ld. A.O opened the case under limited scrutiny for “Non-corporate assessee having business income to whom section 44 AB does not apply and cash deposit in saving Bank account is more than turnover in Bank account of BBN motors”(As per ITS details) and later on left current account mentioned supra and made addition of Rs.8.57 Lacs from the other current account No.5005-3185-861 of appellant, by suo-motto widening the scope of limited scrutiny, which is ultra-vires to the CBDT circular and order was void-ab-initio.

3. That Id. CIT(A) wrongly ignored that, the ld. A.O overlooked the CBDT instruction No-20/15 dated 29-12-15, while issuing the first notice u/s. 143(2) dated 1-08-16 and notice is bad in law, as-well- as, Ultra-vires to the board circular being not mentioning scope of enquiry and reason for selection.

4. That no permission of Pr. CIT was accorded by A.O before widening the scope of limited scrutiny and order of A.O is void-ab-initio.

5. That the ld. CIT(A) has wrongly ignored that the A.O has not given telescopic benefit of total cash deposit of Rs.8,57,000/- vs. total cash withdrawn of Rs.7,57,959 during the year from the same current A/c No. 5005-3185-861 of the appellant, before confirming addition of Rs.8,57,000/.”

During the course of hearing, the assessee has also raised an additional ground that reads as under:-

  1. “That the Ld. A.O. accepted sale proceeds as offered, as well as, the returned income of the appellant and then again cannot be permitted to make the addition u/s 69, of said sale proceeds etc. as unexplained investments being cash deposited in the bank out of cash sales, which amounts to double addition, once as sales and secondly as unexplained investments.”

Facts giving rise to the present appeal are that in this case, the return of income was filed through e-mode on 03.12.2015 vide acknowledgement No.898867150031215, declaring total income at Rs.2,69,600/-. Subsequently, the case was selected for limited scrutiny under CASS for cash deposit in bank accounts being more than the turnover. A notice u/s 143(2) of the Income Tax Act, 1961 (“the Act”) was issued and duly served upon the assessee. In response thereto, the assessee and her husband appeared before the AO and filed the details. The AO thereafter, proceeded to frame the assessment u/s 143(3) of the Act. Thereby, he made addition of Rs.8,57,000/- being the cash deposited in the bank account of the assessee.

Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions and perusing the material available on record, dismissed the appeal of the assessee and sustained the impguend addition. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal.

Per contra, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below. He submitted that there is no illegality into the orders of the authorities below. The assessee grossly failed to explain the source of cash deposits in the bank account. The contention of the assessee is that he had carried out certain business activities which are not supported by any plausible evidence. Therefore, the AO was justified in making the addition, treating the cash deposits as unexplained.

In re-joinder, Ld. Counsel for the assessee submitted that the account in which cash was deposited belonged to the husband of the assessee, therefore, the assessment deserves to be quashed at threshold itself.

Observation by the Court

The court  have heard the contentions of Ld. Authorized representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The assessee has challenged the impugned order. Firstly, on the basis that the case was taken for limited scrutiny regarding cash deposits in the bank account was more than the turnover. Secondly, by way of additional legal ground, the assessment order is assailed on the ground that when the AO accepted the sale proceeds then he cannot be permitted to make addition u/s 69 of the Act. Thirdly, it is argued that the AO failed to appreciate the fact that there were cash deposits as well as withdrawals from the bank account of the assessee. The objection of the assessee regarding the AO having exceeded his jurisdiction in view of the Instruction No.20/15 dated 29.12.2015 issued by CBDT is misplaced as the assessee was required to explain the source of cash deposits in the bank account. It is seen from the records that the AO has restricted the scrutiny to verify the cash deposits in the bank account. Hence, the objection of the assessee that the AO exceeded the jurisdiction is ill-founded hence, rejected. Another plea of the assessee is that the account does not belong to the assessee. Further, bank A/c No.50053185861 maintained with Kangra Central Co-op Bank Ltd., Mubarkpur, it was recorded by the AO that during the year under consideration, the assessee made cash deposits in the said account to the tune of Rs.8,57,000/-. It is further observed by the AO that till the finalization of the assessment, the assessee could not substantiate with documentary evidence about the basis of her gross total turnover of Rs.8,31,625/- disclosed in the Income Tax Return filed on 03.12.2015. Therefore, cash deposited in the bank account No. 50053185861 was treated as unexplained. It is seen from the bank statement furnished by the assessee for the period 01.04.2014 to 31.03.2015, there are deposits and withdrawals from the bank account of the assessee. The total deposits are Rs.8,24,000/- and withdrawals of Rs.9,35,084/-. The AO has not given any finding regarding withdrawals of such amount.

Looking to the totality of the facts and circumstances of the present case, the court are of the considered view that the authorities below ought to have given a clear finding regarding withdrawals made by the assessee during the year under consideration. Therefore, in view of the facts of the present case, there are debit entries in the bank statement of the assessee. The addition of entire deposits as unexplained was not justified. Hence, the assessee deserves to get benefit of tele-scoping if the benefit of tele-scoping is allowed then the entire addition would not survive. The AO is therefore, directed to delete the addition.


In the result, the appeal of the assessee is partly allowed by the court.


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