Cash Deposit – Read the Rules Before Withdrawing or Depositing Cash at Bank! What is the Court Order?

New Delhi: Many people withdraw money from their banks, but if the intended purpose is not fulfilled, they subsequently redeposit it. Few realise that this habit of frequently withdrawing and depositing money at a bank can land you on the Income Tax Department’s radar. A similar situation has recently come to light involving a woman.

A ruling by the Income Tax Appellate Tribunal (ITAT) has taken everyone by surprise. After all, many individuals withdraw money from their bank accounts and take it home whenever a need arises. If the intended task or transaction does not materialise, people often redeposit the money back into the bank. In many instances, the money withdrawn from the bank is redeposited without ever having been utilised.

Against this backdrop, a significant ruling has emerged that offers relief to thousands of taxpayers who received notices from the Income Tax Department for depositing cash in banks during the 2016 demonetization period. The Income Tax Appellate Tribunal has clarified that tax officials cannot impose penalties on a common citizen based solely on conjecture or assumptions.

When the Funds Were Deemed ‘Illegal’ During Investigation

According to a report by *The Financial Express*, a landmark verdict was delivered in the case of *ITO vs. Purnima Das*. The case involved a woman who, before 2016, had withdrawn approximately ₹15 lakh from her bank account at various intervals. Subsequently, during November and December of 2016, she redeposited that very same amount back into the bank.

During the investigation, the tax official deemed these deposited funds to be ‘illegal.’ During the hearings, the woman explicitly clarified that the deposited amount did not represent any fresh earnings; rather, it consisted of the very funds she had previously withdrawn from the bank. Furthermore, she submitted documentary evidence in the form of bank transaction records to substantiate her claim.

This evidence established that the funds in question did not constitute ‘undisclosed income.’ However, the tax official rejected this argument. He contended that no individual would typically keep such a substantial sum of money at home—without either spending it or investing it—for an extended period. Citing the principle of “human probability,” he classified the funds as illegal income.

Verdict Delivered in the Woman’s Favour

The ITAT deemed this line of reasoning to be untenable and delivered a verdict in the woman’s favour. The Tribunal observed that when evidence of cash withdrawals from a bank exists, yet there is no proof of their expenditure, the funds cannot be declared illicit solely based on suspicion.

Clarifying further, it stated that even if an individual’s explanation appears strange or unusual, it cannot be dismissed in the absence of concrete evidence. The onus of proving it incorrect lies with the Tax Department.