ITAT Ahmedabad Holds Cash Re-Deposits Explained by Earlier Withdrawals; Section 69A Addition of ₹14.37 Lakh Deleted

1. Background of the Dispute

The Income Tax Appellate Tribunal, Ahmedabad Bench, in the case of Gaurav Harshadbhai Chokshi Vs ITO, examined whether cash deposited in a bank account could be treated as unexplained money under Section 69A of the Income Tax Act 1961 when the assessee claimed that such deposits came from earlier cash withdrawals from the same bank account.

For Assessment Year 2018-2019, reassessment proceedings were initiated based on information regarding cash deposits in the assessee’s bank account. The central controversy was whether cash deposits totalling ₹14,37,910 represented unexplained money or were sufficiently explained by earlier withdrawals amounting to ₹15,73,500 from the same account.

The Tribunal ultimately deleted the Section 69A addition but treated the ground on penalty initiation under Section 271AAC(1) as premature, thereby partly allowing the appeal.

2. Reassessment Proceedings and Return Filing

Reassessment was triggered when the Department received information about cash deposits in bank accounts of the assessee, a resident individual, for the relevant previous year corresponding to Assessment Year 2018-2019.

• A notice under Section 148 was issued.
• In response, the assessee filed a return of income on 30/03/2023, declaring an income of ₹4,42,200.
• The reassessment order was ultimately passed on 23/03/2024 under Section 147 read with Section 144B.

The dispute revolved around the source of cash deposits and whether they were to be brought to tax under Section 69A read with Section 115BBE.

3. Assessee’s Explanation Before the Assessing Officer

During assessment, the assessee furnished detailed submissions explaining the nature and source of cash deposits:

3.1 Position Regarding Bank Accounts

The assessee clarified that he maintained more than one account with Syndicate Bank (now Canara Bank):

• Bank Account No. 70432010045890 (Syndicate Bank)

  • Described as a dormant or dead account.
  • The assessee asserted that there were no cash deposit transactions in this account during the relevant financial year.

• Bank Account No. 70432010044551 (Syndicate Bank / now Canara Bank)

  • Identified as the active bank account.
  • The assessee pointed out that actual cash deposits in this account during the year were ₹14,37,910, and not ₹54,67,410 as initially taken into consideration by the Department.

3.2 Source of Cash Deposits – Earlier Withdrawals

The assessee’s core contention was that the entire cash deposited in the active account was explained by earlier cash withdrawals from the same account:

• Period of relevant withdrawals: 14/05/2017 to 31/03/2018
• Total cash withdrawn during this period: ₹15,73,500
• Total cash deposited in the same account: ₹14,37,910

Thus, on the assessee’s version, the total cash withdrawals exceeded the total cash deposits, indicating that deposits were not independent, unexplained sources but merely a recycling of cash.

The assessee also relied on the cash book and a detailed chronological working (including a “Peak Credit Summary”) to demonstrate availability of sufficient cash on each relevant date.

4. Assessment Order: Section 69A Addition and Application of Section 115BBE

The Assessing Officer did not accept the assessee’s explanation. The key reasons and outcome were as follows:

• The Assessing Officer concluded that:

  • There was no clear or direct correlation between the dates and amounts of cash withdrawals and cash deposits.
  • The pattern of withdrawals and deposits, in his view, did not support the assessee’s contention that the earlier withdrawals were re-deposited.

• Consequently:

  • The entire sum of ₹14,37,910 representing cash deposits was treated as unexplained money under Section 69A.
  • This amount was taxed in the assessee’s hands under Section 115BBE.
  • The reassessment order was passed under Section 147 read with Section 144B on 23/03/2024.

5. First Appeal Before CIT(A): Reliance on Human Probabilities

The assessee filed an appeal before the National Faceless Appeal Centre, Delhi (referred to as CIT(A)), challenging:

• The Section 69A addition of ₹14,37,910.
• The manner in which the reassessment order was passed.
• The initiation of penalty proceedings under Section 274 read with Section 271AAC(1).

5.1 CIT(A)’s Reasoning

By order dated 23/12/2025, the CIT(A) upheld the addition. The reasoning included: