INDU SANJEEV KHOSLA,MUMBAI vs. INCOME TAX OFFICER, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER) ITA 3935/MUM/2026 AssessmentYear:(2017-2018) INDU SANJEEV KHOSLA INCOME TAX OFFICER 3, 9TH FLOOR, B WING, BAY VIEW AAYKAR BHAWAN, MUMBAI, BUILDING, BON BON LANE JUHU MUMBAI-400020, Vs. VERSOVA LINK RD, ANDHERI WEST, MAHARASHTRA.s MUMBAI-400053, MAHARASHTRA. Appellant Respondent

PAN No.AAGPK4195A

Appellant represented by: Shri. PravinAdake Respondentrepresented by: Shri. Ajay Soneji, SR.DR Date of hearing: 24.08.2026 Date of pronouncement: 18.09.2026 ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against the order dated 29.01.2026 passed by the learned National Faceless Appeal Centre (NFAC), Delhi [herein after shall be referred as learned ‘CIT(A)’] for assessment year 2017-18, raising following grounds:

“This appeal is filed by the assessee before Honorable Tribunal against the appellate order o the learned Commissioner of Income Tax Appeal-NFAC- passed u/s 250 of Income Tax Act, 1961 dated 29-01-2026 for A.Y. 2017-2018 which in turn arise from the assessment order passed by Assessing Officer.

On the facts and circumstances of case the learned assessing officer, Circle- 16(2) while completing assessment and passing assessment order u/s.143(3) of the Income Tax Act datec 23-12-2019 for A.Y.2017-2018 has erred in assessing total income of assessee al Rs.1,33,36,210/- as against returned income of Rs.44,58,210/- thereby making total additior of Rs.88,78,000/- as follows: (1) Addition of Rs. 88,78,000/- as Unexplained cash deposits u/s 69A of the IT Act, 1961. Aggrieved by the assessment order, the assessee filed appeal before CIT(A) on 22-01-2020 Subsequently, the appeal was migrated to National Faceless Appeals Centre (NFAC) (1) On appeal the learned Commissioner of Income Tax Appeals National Faceless Appeals Centre (NFAC) has upheld the action of AO and confirmed the Addition of Rs. 88,78,000/as Unexplained cash deposits u/s 69A of the IT Act, 1961.” 2. Briefly stated, the assessee is an individual and a medical professional, engaged in the profession of pediatrics and running a hospital besides providing consultancy services. For the year under consideration, she filed her return of income on 29.10.2017 declaring total income of Rs.44,58,210/-.The return was selected for limited scrutiny for verification of high-value cash deposits during the demonetization period ( i.e. 9/11/2016 to 30/12/2016). The Assessing Officer noticed that cash aggregating to Rs.88,78,000/- had been deposited in the assessee’s four bank accounts during the relevant previous year. The Assessing Officer, therefore, called upon the assessee to explain the source of the deposits and to produce, inter alia, the books of account, cash book and daily case register in Form No. 3C.The assessee explained that the cash deposits represented professional receipts from patients. However, according to the Assessing Officer, the daily case register in Form No. 3C was not produced. He further observed that the cash book did not disclose a substantial cash balance immediately preceding the demonetization period and that there was a sudden increase in cash receipts during the relevant period. In the absence of patient-wise details and other supporting evidence, the explanation of the assessee was not accepted.The Assessing Officer also did not accept the assessee’s explanation that the hospital was situated in a cosmopolitan area and that a substantial portion of the fees was received in cash. The Assessing Officer also rejected contention of the assessee that the area where the hospital was situated is cosmopolitan and involves cash payments from lower middle class citizens. He considered the explanation to be general in nature, not backed by specific data of the patients and, accordingly, treated the cash deposits of Rs.88,78,000/- as unexplained money in terms of Section 69A of the Income Tax Act, 1961 (in short 'the Act').

3.On appeal, the learned CIT(A) sustained the addition. The learned CIT(A), inter-alia, observed that the assessee had failed to produce the daily case register prescribed under Rule 6F of the Income-tax Rules, 1962, and had not furnished patient-wise or month-wise details of professional receipts. According to him, the cash deposits during the demonetization period were disproportionate to the normal pattern of cash receipts and the explanation furnished by the assessee was not supported by adequate primary evidence. The learned CIT(A), therefore, concluded that the assessee had failed to satisfactorily explain the source of the cash deposits and confirmed the addition of Rs.88,78,000/- under section 69A of the Act. The relevant finding of ld CIT(A) is reproduced as under:

“5.1. I have carefully considered the Assessment Order, the Grounds of Appeal, andthe detailed written submissions filed by the appellant. The primary issue is thetaxability of Rs. 88,78,000/- deposited in cash during the demonetization periodunder section 69A of the Act. 5.2. On the Onus of Proof: Under the scheme of the Income Tax Act, particularly inthe context of cash deposits, the initial onus lies on the assessee to explain thenature and source of such deposits. In the case of a professional, this onus isdischarged by producing primary records that establish a direct link between theprofessional activity and the cash receipt. 5.3. Absence of Mandatory Records: As per Rule 6F of the Income Tax Rules,every person carrying on a medical profession is required to maintain a daily caseregister in Form No. 3C. This register is a vital document as it records the name ofthe patient, the nature of the treatment, the date of receipt, and the amount of feereceived. The AO has specifically noted that the appellant failed to produce this register. In theabsence of Form 3C, the "Cash Book" produced by the appellant becomes asecondary, self-serving document that cannot be verified against any primary recordof patient visits. 5.4. Analysis of the "Demonetization Spurt": The timing of the cash deposits iscritical. The amount of Rs. 88,78,000/- was deposited within a window of roughly 50days. While the appellant claims that her total annual cash fees were Rs. 1.05Crores, she has failed to explain why such a disproportionately high percentage (over80%) of the annual cash fees was deposited only during the demonetization period. Ifthe cash was received throughout the year as "fees," it should have been depositedregularly to meet the "salary, rent, and drug purchases" mentioned in the submission. The accumulation of such a large amount of cash at home or in the hospital until theannouncement of demonetization is contrary to normal business/professionalconduct. 5.5. Verification of Professional Receipts: The appellant's argument that "GrossIncome > Cash Deposits" is a logical fallacy. Having a high turnover does notautomatically explain any and all cash deposits. Each credit in the bank account mustbe supported by its own source. The appellant failed to provide a patient-wise breakup or even a month-wise summary of cash receipts that would justify a balance of Rs.88.78 Lakhs being available for deposit in November 2016. 5.6. Evaluation of the "Cosmopolitan Area" Argument: The appellant claims thatbecause the hospital is near "hutments," patients pay in cash. While this may be truefor small consultation fees, it does not explain the sheer volume of cash. For anindividual to deposit Rs. 88 Lakhs in cash, there must be a massive volume oftransactions. Without the daily case register, there is no way to verify if these weregenuine patients or merely a "layering" of unaccounted money under the guise ofprofessional fees. 5.7. Legal Marshalling: The Hon'ble Supreme Court in the case of P. Mohanakalahas held that if the explanation offered by the assessee regarding the credit entries isnot satisfactory, the AO is justified in treating the same as the income of theassessee. In the present case, the "unsatisfactory" nature of the explanation arisesfrom the complete lack of primary documentation (Form 3C) and the illogicalaccumulation of cash until the demonetization period. 5.8. Conclusion: The appellant has relied on generalities rather than specificevidence. The failure to maintain and produce the statutory daily case register is afatal flaw in the appellant's defense. The AO's finding that the cash deposits areunexplained under section 69A is a logical conclusion derived from the facts of thecase and the lack of evidentiary support provided by the appellant. The addition is notbased on "conjectures" but on the "absence of proof" for which the onus was on theappellant. 5.9. Decision: In view of the above observations and the detailed findings of the AO,I find no reason to interfere with the assessment order. The addition of Rs.88,78,000/- is confirmed.” 4. Before us, the assessee was represented through her authorised representative, who filed a paper book ( Pages 140 ) comprising detailed statements of all four bank account, whereas the learned Departmental Representative relied upon the orders of the lower authorities.

5.1 The said details reveal that no cash was deposited during November or December 2016 in Canara Bank Account No. 0121201005895. Likewise, no cash deposit was made during November or December 2016 in Canara Bank Account No. 0171101082901.In HDFC Bank Account No. 00191530003828, cash deposits of Rs.2,00,000/- in November and Rs.2,30,000/- in December were reflected. However, on examination of the complete bank statement placed in the paper book, the deposit of Rs.2,00,000/- in November was found to comprise two deposits of Rs.1,00,000/- each made on 01.11.2016 and 02.11.2016, i.e. prior to commencement of the demonetization period.In the fourth account maintained with HDFC Bank, Account No. 50200017342163, a cash deposit of Rs.2,98,000/- was made in December 2016.

5.2 Thus, on the basis of the account-wise details, the cash actually deposited during the demonetization period was only Rs.5,28,000/- comprising Rs.2,30,000/- deposited in HDFC Bank Account No. 00191530003828 and Rs.2,98,000/- deposited in HDFC Bank Account No. 50200017342163. The balance of the amount of Rs.88,78,000/- was not deposited during the demonetization period.

5.3 Before us, the assessee has filed her complete cash deposits for the last three years in each account-wise as under:-

Details of Cash Deposit in every bank account during the Previous years

Financial Canara Bank Canara Bank HDFC HDFC Total Year 0121201005895 0171101082901 00191530003828 50200017342163 2016-17 4750000 800000 3030000 298000 8878000 2015-16 8050000 1900000 2499000 NIL 12449000 2014-15 8696000 3400000 2010000 NIL 14106000 5.4 The assessee has also placed before us the account-wise details of cash deposits for the preceding two years and the year under consideration. The details show cash deposits of Rs.1,41,06,000/- in Financial Year 2014-15, Rs.1,24,49,000/- in Financial Year 2015-16 and Rs.88,78,000/- in Financial Year 2016-17. Thus, the assessee had been regularly depositing cash in her bank accounts in the ordinary course of her professional activity even in the years preceding the demonetization period.

5.5 The aforesaid factual position assumes significance because the addition has been made by treating the entire amount of Rs.88,78,000/- as cash deposited during the demonetisation period. That factual premise is demonstrably incorrect. Once the bank statements themselves establish that only Rs.5,28,000/- was deposited during the relevant period, the reasoning adopted by the lower authorities for treating the entire amount of Rs.88,78,000/- as a demonetization period deposit cannot be sustained.

5.6 We further note that the assessee had been carrying on medical profession and had disclosed professional receipts in her books. The fact that cash was regularly deposited in her bank accounts in the preceding years has not been disputed. The mere fact that the assessee did not produce the daily case register in Form No. 3C may constitute a circumstance requiring verification of the professional receipts; however, in the present case, it cannot, by itself, justify treating the entire cash deposits of Rs.88,78,000/- as unexplained, particularly when the basic factual premise regarding the period of deposit itself is found to be incorrect.

5.7 It is also material that the Assessing Officer has not rejected the books of account or otherwise demonstrated that the cash receipts recorded therein were not professional receipts. Having regard to the account-wise bank statements and the consistent pattern of cash deposits in the preceding years, the addition cannot be sustained merely on the assumption that the entire amount of Rs.88,78,000/- represented cash accumulated for the purpose of depositing it during the demonetization period.

5.8 In view of the foregoing discussion, we find that the very foundation on which the addition was made is factually unsustainable. The Revenue has failed to establish that the entire sum of Rs.88,78,000/- represented unexplained money of the assessee within the meaning of section 69A of the Act. Accordingly, the addition of Rs.88,78,000/- is deleted. The ground of the appeal of the assessee are accordingly allowed.

Order pronounced in the open Court on 18/09/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 18/09/2026 M. RanganathVittal , Sr. P.S.

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai