VIKAS KUMAR AGARWAL,DHANBAD V. ITO, DHANBAD

ITA 395/RAN/2025

AI Insights

The case involves Vikas Kumar Agarwal, a salaried employee, who appealed against the order of the Addl/JCIT(A)-2, Chennai, which confirmed the addition of Rs. 14,95,000 to his income for the Assessment Year 2017-18. The addition was made by the Assessing Officer (AO) under Section 69A of the Income-tax Act, 1961, treating the cash deposits made during the demonetization period as unexplained income. The AO had initially found that the assessee deposited significant amounts in his bank accounts and failed to satisfactorily explain the sources of these deposits. The Tribunal noted that the AO did not consider the withdrawals made from the same accounts, which could offset the deposits. The Tribunal's decision emphasized a comprehensive evaluation of both deposits and withdrawals to determine the actual income.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 847163 (ITAT-RANCHI)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Ranchi
• Assessment Year: 2017-2018
• Appeal Filed On: 13-11-2025
• Other Referred Cases: Shri Samir Kamruddin Makhani vs The Asstt. Commr. Of Income Tax
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Peak credit
• Section: 143(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI SONJOY SARMA, JUDICIAL MEMBER AND SHRI RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER ITA No. 395/Ran/2025 (Assessment Year-2017-18) (Virtual Hearing) Vikas Kumar Agarwal, 508, Garden City, Luby Circular Road, Dhanbad-826001 (Jharkhand) PAN No. AEGPA 9380 K Vs. I.T.O., Dhanbad. Appellant/ Assessee Respondent/ Revenue Assessee represented by Shri Devesh Poddar, Adv. Department represented by Shri Kailash Gautam, Sr.DR Date of hearing 05/02/2026 Date of pronouncement 25/03/2026 O R D E R PER: RATNESH NANDAN SAHAY, A.M. 1. This appeal by the assessee is directed against the order of the learned Addl/JCIT(A)-2, Chennai dated 12/09/2025 for the Assessment Year (AY) 2017- 18. The assessee has raised following grounds of appeal: \"1) Sir, the Learned AO has erred in law and on facts in making an addition of Rs.14,95,000/- towards cash deposits made during the demonetisation period, merely on conjectures and surmises, without proper appreciation of facts and evidences placed on record. 2) Sir, the appellant is a salaried person and working from several years and has been filing his income tax return regularly. 3) Sir, the Learned AO failed to appreciate that the cash deposits in the appellant's bank account during the year under consideration were duly explained as being sourced from earlier years' accumulated savings and current year's income, both of which are duly disclosed and assessed. 4) Sir, we agreed that the appellant had no cash income but the Learned AO has disregarded the fact that the appellant had made substantial cash withdrawals of Rs.9,48,000/- from his Bank Accounts during the year, prior to the demonetisation period, which clearly demonstrate availability of cash for redeposit. 5) Details of Cash Withdrawals during the last 7 years are as under:- Printed from counselvise.com ITA No. 395/Ran/2025 Vikas Kr Agarwal Vs ITO 2 6) Sir, the appellant was having an opening cash balance of Rs. 14,40,900/- as on 01.04.2016, which was completely ignored by the Learned AO while making the impugned addition. 7) That there were regular and continuous cash withdrawals and deposits in the appellant's bank accounts during the relevant period, which clearly establishes the genuineness and rotation of cash. 8) Sir, we are hereby attaching the cash flow from the FY 2014-15 to FY 2016-17 in Annexure A for your kind perusal. We are also attaching the Bank statement from the AY 2015-16 to AY 2017-18 in Annexure B to evident the cash transaction and cash withdrawals from the Bank Accounts. 9) That deposit in the Bank Account cannot be treated as income on standalone basis without considering the withdrawal. 10) That the Learned AO has erroneously made addition of total cash deposits in the bank accounts by considering only the credit side of the bank account and the debit side i.e. withdrawal has been ignored altogether. This cannot be considered justified because, it is legally settled principle that the evidence should be relied upon in total and not in piece-meal manner. 11) In the recent judgment of Shri Samir Kamruddin Makhani vs The Asstt. Commr. Of Income Tax, on 14 September, 2022 it was held as under:- \"Admittedly, there were huge cash deposits in the account of the assessee. But at the same time there were huge withdrawals from the bank in cash. Thus, we are of the view that if the cash deposits are treated as income of the assessee then at the same time cash withdrawal from the bank should be treated as expenses. As such the AO cannot take a view which is benefiting the Revenue without considering the fact for the withdrawal of cash. We also find that there is no iota of evidence suggesting that the assessee has made any investments or incurred any expenditure of personal nature out of the cash withdrawn from the bank. Thus we are of the view that the amount of cash deposits alone cannot be treated as income of the assessee.\" 12) Further, that it is also legally settled principle that if there are withdrawal from the same account in cash prior to the deposit in cash, it is considered that the cash withdrawn has been utilized to deposit in the same account. Printed from counselvise.com ITA No. 395/Ran/2025 Vikas Kr Agarwal Vs ITO 3 13) That further the Learned AO has nowhere in his order has brought out any material on record to show that Assessee is having any additional source of Income. There is no law in the country which prevents citizen to frequently withdraw & deposit its own money. In light of the above, it is clear that the addition made by treating the total amount of cash deposits as unexplained income is arbitrary, excessive, and devoid of any legal or factual basis, and therefore deserves to be deleted in full. The other grounds of Appeal will be made at the time of hearing. 2. Facts of the case, in brief, are that the case of the assessee was selected for limited scrutiny with the reason that \"large value cash deposits during demonetization period as compared to returned income.\" The Assessing Officer during the assessment proceedings under Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act) found that the assessee had deposited a sum of ₹ 6.00 lacs and ₹ 8.00 lacs (total ₹ 14.00 lacs) in his two bank accounts in HDFC bank and Yes bank respectively. The Assessing Officer asked the assessee to explain the source of this cash deposit but the assessee did not explain the same and only stated that this is from his bank accounts maintained in the banks and since it has come from the banking channels, there is no further need to explain the source of cash deposits. He also stated before the Assessing Officer that since he is a salaried employee, he is not required to maintain the books of accounts. The Assessing Officer, however, repeatedly asked him to give the cash flow statement and also to give the details of the withdrawals made but the assessee failed to do so. The Assessing Officer, therefore, treated the cash deposits made in the bank accounts amounting to ₹ 14.95 lacs as unexplained money under Section 69A of the Act Printed from counselvise.com ITA No. 395/Ran/2025 Vikas Kr Agarwal Vs ITO 4 and added to the total income of the assessee and taxed it @ 60% under Section 115BBE of the Act. 3. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the ld. JCIT(A), who vide the impugned order, dismissed the appeal of the assessee on the ground that the appellant has failed to discharge the onus to explain the source of cash deposits. 4. Further aggrieved by the order of the ld. JCIT(A), the assessee has filed present appeal before this Tribunal. 5. During the course of hearing, the ld. AR of the assessee submitted that the ld. JCIT(A) was not correct in dismissing the appeal of the assessee on the ground that the assessee has failed to substantiate its contention by producing the documentary evidence and cash flow statement to explain the source of cash deposits made in the different banks. The assessee is a salaried employee and has no other income and whatever has been received from salary has been deposited in the bank accounts and the cash withdrawals have also been made from the said bank accounts. So, there cannot be any further explanation of the source of cash deposits. It was also argued by the ld. Authorised Representative that even if the addition was made on account of cash deposits in the bank accounts, the assessee is entitled to get credit for the withdrawals made from the same bank accounts and the Assessing Officer should have applied the peak credit method to determine the actual income of the assessee which the Assessing Officer has failed to do so and the ld. JCIT(A) has ignored this fact while passing the impugned order. 6. On the other hand, the ld. Sr.DR supported the orders of the lower authorities. Printed from counselvise.com ITA No. 395/Ran/2025 Vikas Kr Agarwal Vs ITO 5 7. We have carefully considered the rival submissions and we find that if the additions were made on the basis of the bank accounts where the deposits have been added, the assessee was also entitled to get credit of withdrawals made from that bank accounts and the Assessing Officer should have assessed the income by applying the peak credit method while assessing the total income of the assessee. Therefore, the matter is restored back to the file of Assessing Officer to decide the matter afresh with a direction to consider both debit and credit side to assess the income in a fair and correct manner. Needless to direct that before passing the order, the Assessing Officer shall grant reasonable opportunity of being heard to the assessee. In the result, the grounds of appeal raised by the assessee are allowed for statistical purposes. 8. In the result, this appeal of the assessee is allowed for statistical purposes only. Order Pronounced in open court on 25th March, 2026. Sd/- Sd/- (SONJOY SARMA) (RATNESH NANDAN SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER Ranchi, Dated: 25/03/2026 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Ranchi Printed from counselvise.com "