ITAT Deletes Rs. 59.9 Lakh Additions, Grants Major Relief to Taxpayer in Cash Deposit, Gift, Capital Gains Case
Pranav B Prem
The Income Tax Appellate Tribunal (ITAT), Delhi Bench has granted substantial relief to the assessee by deleting multiple additions made by the tax department relating to cash deposits, gift receipts and denial of capital gains exemption. The Bench comprising S. Rifaur Rahman (Accountant Member) and Anubhav Sharma (Judicial Member) held that the authorities had made additions based on assumptions rather than supporting material, ultimately allowing the appeal in full.
A key allegation before the Tribunal concerned the addition of ₹16.41 lakh under Section 69A treating bank deposits as unexplained. The Assessing Officer presumed that once cash was withdrawn, it must have been spent and therefore could not have been re-introduced into the bank account. The Commissioner of Income Tax (Appeals) also sustained the addition on the basis that a cash book had not been produced.
The Tribunal observed that the assessee had withdrawn ₹62.38 lakh during the year and redeposited ₹16.41 lakh, and also explained that the withdrawal was meant for investment in property, which ultimately did not materialise. The Tribunal held that such explanation, supported with bank statements, discharged the assessee’s initial burden, and the revenue could not rely on bare assumption to invoke deeming provisions. It observed that “bald allegation is not sufficient” and that the burden shifted to the department to disprove the trail once the assessee submitted bank-record evidence supporting availability of funds. Accordingly, the addition on account of cash deposits was deleted.
The Tribunal then examined the addition of ₹10 lakh received as a gift from the assessee’s mother-in-law, which the tax authorities treated as unexplained because there was a credit entry shortly before the gift was transferred. The Bench rejected the revenue’s insistence that the assessee must prove the “source of source”, noting that gifts from close family members stand on a different footing from commercial borrowing. The donor confirmed the transaction and her bank statement showed transfer of funds through banking channels. The Tribunal held that the timing of the deposit could not be a ground to disbelieve the gift and that if the department had any doubts, it should have conducted necessary inquiries rather than making additions based purely on suspicion. The addition was therefore deleted.
The most serious issue arose from the enhancement made by the CIT(A). While deleting the AO’s addition of ₹1.10 crore alleged sale proceeds of property, the CIT(A) simultaneously introduced a new basis of assessment by denying exemption under Section 54B, thereby creating a fresh tax demand of ₹33.49 lakh. The Tribunal held that the enhancement was legally untenable because the assessee was not issued a mandatory show-cause notice before enhancement. It further noted that exemption under Section 54B had not been the subject of addition before the Assessing Officer, and the appellate authority could not introduce a new source of income without granting an opportunity of hearing. Consequently, the enhancement was struck down as invalid. With all three contested additions — cash deposits, gift from mother-in-law, and capital gains exemption — decided in favour of the assessee, the Tribunal allowed the appeal in its entirety and deleted the additions aggregating to nearly ₹60 lakh.
Appearance
Counsel For Appellant: Mansi Jain, Advocate & Siddharth Bajaj, Advocate
Counsel For Respondent: Rajesh Kumar Dhanesta, Sr. DR
Cause Title: Shri Ashok Kumar Versus ITO
Case No: ITA No.498/Del/2025
Coram: S. Rifaur Rahman (Accountant Member), Anubhav Sharma (Judicial Member)
