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Facts
The assessee, a salaried individual, had cash deposits of Rs. 24,65,000 in his bank account. He claimed Rs. 13,66,000 as received from relatives and the balance of Rs. 10,99,000 as opening cash balance from the previous year. The AO treated Rs. 10,99,000 as unexplained income under Section 68.
Held
The Tribunal held that the assessee had discharged the initial onus by providing details and bank statements. The AO failed to rebut the assessee's explanation or discharge the shifting onus. The Tribunal found no merit in the orders of the authorities below.
Key Issues
Whether the CIT(A) erred in partly confirming the addition of opening cash balance under Section 68 despite documentary evidence and judicial precedents, and whether the AO and CIT(A) failed to provide cogent reasons for rejecting the assessee's submissions.
Sections Cited
143(3), 68, 115BBE
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Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR
Date of Hearing 17.09.2025 Date of Pronouncement 10.11.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 17.12.2022 for the Assessment Year [A.Y.] 2021-22. P a g e | 2 A.Y. 2021-22 Mehul Hasmukh Shah 2. The grounds of appeal are as under:
1. Under the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) [“CIT(A)”] erred in partly confirming an addition of Rs.8,99,000/- out of the total addition of Rs.10,99,000/- made under Section 68 of the Income Tax Act, 1961, despite substantial documentary evidence and submissions clearly demonstrating the availability of the opening cash balance.
2. Under the facts and circumstances of the case and in law, the learned CIT(A) erred in disregarding the detailed explanations, documentary evidence, and submissions provided by the appellant without assigning cogent reasons or adequate justification.
3. Under the facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating that the opening cash balance of Rs.10,99,000/- was duly reflected in the closing balance of the preceding financial year, supported by books of accounts and cash flow statements, which the Department had never disputed in any preceding assessment proceedings.
4. Under the facts and circumstances of the case and in law, the learned CIT(A) erred in concluding that the appellant lacked sufficient sources to generate cash, overlooking substantial disclosed sources of income including salary, capital gains, interest, dividends, and documented family borrowings of 22,67,000/-, duly supported by confirmations.
5. Under the facts and circumstances of the case and in law, the learned CIT(A) erred in arbitrarily estimating the allowable cash balance relief at Rs.2,00,000/-, without providing any quantifiable or analytical basis, rendering the order arbitrary and unsustainable in law.
6. Under the facts and circumstances of the case and in law, the learned CIT(A) erred in disregarding binding judicial precedents, notably CIT vs. Bhaichand H. Gandhi (1983) 141 ITR 67 (Bom), Padam Chand Jain v. CIT (299 ITR 225), and Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC), which explicitly state that duly disclosed opening cash balances cannot be rejected without tangible adverse evidence.
7. Under the facts and circumstances of the case and in law, the learned CIT(A) erred in ignoring recent relevant judicial pronouncements, including: Mahesh Subhash Shukla vs. ITO (ITAT Mumbai, June 2025), holding that Section 68 is not applicable in the absence of proper books of account when standalone cash flow statements support cash deposits; Vikram N. Chandan vs. ITO (ITAT Mumbai, July 2024), holding that documentary evidence provided by the appellant cannot be disregarded based merely on suspicion; Kalimuddin Mohamad Rafique vs. DCIT (ITAT Mumbai, May 2025), reaffirming that explanations supported by documentary evidence P a g e | 3 A.Y. 2021-22 Mehul Hasmukh Shah must be addressed on merits, failing which the addition becomes unsustainable.
8. Under the facts and circumstances of the case and in law, the learned CIT(A) erred by merely substituting his subjective estimate for the Assessing Officer's estimate without objectively evaluating and addressing the appellant's documented explanations, which were not contradicted by any evidence placed by the Revenue.
9. Under the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming an addition without bringing forth any concrete evidence or material from the Revenue to establish falsity or inaccuracy of the cash book or refute the authenticity of the opening cash balance.
10. Under the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the applicability of Section 115BBE of the Income Tax Act, 1961, without establishing any concealment of income or furnishing of inaccurate particulars by the appellant, thus Incorrectly invoking provisions applicable to unexplained income.
11. Under the facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating that upon the appellant providing a reasonable explanation backed by documentary evidence, the onus shifted to the Assessing Officer to disprove the appellant's submissions, a burden that remained undischarged.
12. Under the facts and circumstances of the case and in law, the addition sustained by CIT(A) is unwarranted since no discrepancies or falsification in the appellant's books of accounts, statement of affairs, or cash flow statements were demonstrated by the Revenue.
13. Under the facts and circumstances of the case and in law, the learned CIT(A) erred by failing to provide adequate reasons or basis for rejecting appellant's submissions, thereby violating principles of natural justice 3. Briefly stated facts of the case are that the assessee is basically a salaried person deriving income from Salary as well House property and Other sources. His case was taken up for scrutiny of cash deposits in the bank account of Rs 24,65,000/-. The assessee claimed that Rs. 13,66,000/- was received from various relatives etc. for different purposes including investment while the balance Rs 10,99,000/- P a g e | 4 A.Y. 2021-22 Mehul Hasmukh Shah represented opening cash balance as per the Cash Book/ Statement of Affairs submitted. However, the contention w.r.t. Rs 10,99,000/-was rejected by the AO on the ground that no documentary evidences were submitted and also the assessee not doing any business activity, such deposit was not accepatable. The amount was therefore treated as Unexplained amount u/s 68 of the Act.
4. In the subsequent appeal, the assessee contested the addition reiterating the same contentions as made before the AO. However, the ld,CIT(A) partly concurred with the AO and gave a relief of Rs 2 lakh on estimate basis.
5. Before us, the ld.AR has submitted a paper book which inter alia contains Cash book/Statement of affairs as per pages 10 to 23 thereof in which the opening cash balance is explained from the Closing balance of FY 2019-20.The above details are claimed to have been submitted alongwith copies of bank statements reflecting withdrawals from the bank account before both the lower authorities. It is pleaded that both of them did not consider the evidence in proper perspective. It is also submitted that the impugned sum could not be taxed u/s 68 of the Act, being bank deposit as per ratio of decision in the case of CIT v Bhaichand Gandhi 141 ITR 67 (Bom) in which it was held that bank pass P a g e | 5 A.Y. 2021-22 Mehul Hasmukh Shah book could not be considered books of account. Further, it is stated that opening cash balance also could not be taxed in the impugned year. Reliance is placed on CIT vs Usha Stud and Agricultural Farms Ltd 301 ITR 384(Del).
5.1 Per contra, the ld.DR has submitted that the Opening cash balance of Rs 10.99 lakh was not explained or correlated with the past records by the assessee. Therefore, the same was rightly added in the year under consideration.
We have carefully considered all relevant facts of the case, have perused the records and also considered rival submissions. We find that the AO added the opening cash balance claimed to be carried forward from the preceding year without pointing out any infirmity in the claim and brushed it aside giving vague reasons. The assessee had also submitted copies of bank statements before him duly disclosing the respective withdrawals from time to time to explain the impugned sum, none of which have been rejected on any cogent grounds. The AO has also not appreciated the facts that the assessee was deriving substantial amount of salary which is an undisputed fact which could be sufficient sources to generate cash, apart from house property income, capital gains, interest, dividends, and also family borrowings, duly supported by P a g e | 6 A.Y. 2021-22 Mehul Hasmukh Shah confirmations. We are of the considered view that the assessee had duly discharged the initial onus on him by submitting above stated details. Therefore, the AO by making vague findings and observed has not been able to rebut the same or discharge the onus shifting on him. No discrepancies or falsification in the assessee's statement of affairs, or cash flow statements were demonstrated by the Revenue. Thus, without pointing out any deficiency and without rejecting the entries recorded therein, he was not justified in making the addition merely on presumptions. The ld.CIT(A) also neither rejected the Statement of affairs nor pointed out any infirmity therein but gave a relief of Rs. 2 lakh only on estimate which is also lacks any basis. Considering the totality of the facts and the circumstances of the case, we do not find ant merit in the orders of the authorities below. Thus, the appellate order is set aside and the AO is directed to delete the impugned addition.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 10/11/2025. SANDEEP GOSAIN PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)