The Chennai bench of the Income Tax Appellate Tribunal (ITAT) recently ruled that taking money out of your own bank account cannot be used to increase your taxable income under a specific section 69A of the Income Tax Act. This means that just because you withdraw cash from your own savings, it doesn’t mean you owe more taxes.
Shri Jaisingh Shankar, an individual taxpayer, failed to file his income tax return for the financial year 2017-18. Authorities noticed large amounts of money, specifically Rs. 3.67 crore, going into his bank account. As a result, they began a review of his finances under a specific section 148 of the Income Tax Act.
The AO deemed cash withdrawals of Rs 3.44 crore as unexplained money u/s 69A read with Section 115BBE, as the taxpayer did not provide beneficiary details.
The taxpayer said that he was acting as a commission agent/sub-agent for foreign exchange companies and the funds received were only for customer disbursements after KYC verification.
After analysing bank statements, books of account, and Form 26AS reflecting commission income subjected to TDS under Section 194H of the Income Tax Act, the FAA said that the taxpayer was an intermediary and not the beneficial owner of the funds. Subsequently, the addition was removed, against which the revenue submitted a plea before the tribunal.
The counsel of the department relied on the grounds raised and the findings of the AO.
The authorised representative repeated the submissions made to the income tax authorities, and it placed reliance on the findings of the FAA.
The Tribunal of George George K, Vice President and Padmavathy S, Accountant Member observed that “In the context of bank transactions, we are of the view that the provision may apply to unexplained cash deposits or credits and not to cash withdrawals from the assessee’s own bank account. Therefore, the basis for invoking section 69A of the Income Tax Act in respect of cash withdrawals in our view is misplaced given the facts and circumstances of the case.”
Read Also: Allahabad HC: Section 69A of the Income Tax Act Does Not Apply to Fund Transfers Between Accounts
The bench said that in the absence of any contrary proof and considering the nature of transactions duly supported via the books of account, bank statements, and Form 26AS, the taxpayer had eased the transfer of funds on behalf of foreign exchange companies. The amounts routed via the taxpayer’s bank account did not consist of unexplained money under the Income Tax Act. The tribunal said that the approach chosen by the AO was not lawfully sustainable.
| Case Title | The Income Tax Officer vs Shri Jaisingh Shankar |
| Case No. | ITA No.: 2931/CHNY/2025 |
| For Petitioner | Ms. Nayani Swapna, CIT |
| For Respondent | Shri H. Yeshwanth Kumar, Advocate |
| Chennai ITAT | Read Order |
