Facts of the Case

The appellant-assessee, Shashi Garg, filed an appeal under Section 260A challenging the order of the Income Tax Appellate Tribunal which upheld additions made by the Assessing Officer.

  • The assessee had withdrawn ₹99,25,000 in cash during FY 2009–10.
  • Subsequently, she deposited ₹35,25,000 in cash during FY 2010–11 in her bank account.
  • The explanation provided was that the cash withdrawals were made for a proposed property purchase, which later did not materialize.
  • The Assessing Officer rejected this explanation and treated the deposits as unexplained cash credits under Section 68.

The Commissioner (Appeals) partly allowed relief of ₹9,00,000 but confirmed addition of ₹26,25,000, which was upheld by the Tribunal.

Issues Involved

  1. Whether cash deposits made in a subsequent financial year can be explained by withdrawals made in a prior year.
  2. Whether the assessee successfully discharged the burden of proof under Section 68.
  3. Whether the explanation of intended property purchase without supporting evidence is acceptable.
  4. Whether findings of fact by lower authorities can be interfered with under Section 260A.

Petitioner’s Arguments

  • The assessee contended that:
    • Cash deposits of ₹35,25,000 were sourced from earlier cash withdrawals exceeding ₹75,50,000.
    • The withdrawals were made to facilitate a real estate transaction, requiring cash readiness.
    • Therefore, the deposits stood explained and should not be treated as unexplained income.

Respondent’s Arguments

  • The Revenue argued that:
    • The explanation was implausible and unsupported by evidence.
    • The pattern of withdrawals and deposits was inconsistent and lacked logical correlation.
    • The assessee failed to produce any proof of property transaction or agent confirmation.
    • The deposits were rightly treated as unaccounted income under Section 68.

Court Findings / Order

The Delhi High Court held:

  • The findings of the Assessing Officer, CIT(A), and Tribunal were purely factual and based on evidence.
  • There was a clear time gap between withdrawals (FY 2009–10) and deposits (FY 2010–11), weakening the explanation.
  • The assessee’s justification was found to be illusory, inconsistent, and unsubstantiated.
  • The burden to explain the source of deposits was not discharged by the assessee.
  • Courts will not interfere with factual findings unless they are perverse or irrational, which was not the case here.

Accordingly:

  • Appeal dismissed
  • Application for condonation of delay also dismissed

 Important Clarifications

  • Mere cash withdrawals in earlier years cannot automatically explain later deposits.
  • The assessee must establish a direct nexus between withdrawal and deposit.
  • Human probability test and surrounding circumstances play a key role in tax adjudication.
  • Section 68 places a strict burden of proof on the assessee.
  • Factual findings by Tribunal are final unless perverse.

Sections Involved

  • Section 68 – Unexplained Cash Credits
  • Section 260A – Appeal to High Court
  • Section 271(1)(c) – Penalty for concealment/inaccurate particulars

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:7123-DB/SKN02112018ITA12352018.pdf

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