What did the Tribunal hold?

The Tribunal found merit in the assessee's submission that winnings deposited in the bank account were the source for subsequent cash deposits into the gaming platform. It noted that lower authorities did not properly examine the deposits and withdrawals from the gaming platform reconciling with bank statements.

The assessee earned significant winnings from online gaming but declared a loss, not offering the winnings to tax. The AO treated cash deposits of Rs. 32,83,100/- as unexplained after the assessee failed to provide a clear source. The CIT(A) deleted the addition on gross winnings but sustained the addition on unexplained deposits.

What were the issues?

Whether the cash deposits into the online gaming platform were unexplained, or sourced from previous winnings. The proper examination of deposits and withdrawals from the gaming platform in relation to bank statements.

Mahendiran, Dharmapuri vs ITO | s.250 | ITAT Chennai 2026

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: MS. PADMAVATHY.S & SHRI MANU KUMAR GIRI

For Respondent: Ms. P. Sunnanda, Sr. DR

आदेश / O R D E R

PER PADMAVATHY.S, A.M:

This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 03.02.2026 for Assessment Year (AY) 2022-23.

The assessee is an individual and filed the return of income for AY 2022-23 on 30.07.2022 declaring total income of Rs.10,21,970/-. The case was selected for scrutiny and the statutory notices were duly served on the

ITA No.2327/Chny/2026 Mahendiran :- 2 -:

assessee. During the course of hearing, the AO noticed that the assessee has earned gross winnings of Rs.1,57,64,297/- from online gaming on the Rummy Culture Platform managed by M/s. Gameskraft Technologies Pvt. Ltd. and that the assessee has not offered the income to tax. The AO called on the assessee to furnish the details in this regard. The assessee submitted before the AO that it has incurred a loss from gaming and therefore the same was not declared in the return of income. The AO however from the statement submitted by the assessee noticed that the assessee deposited cash on various dates amounting to Rs. 35,96,300/-. The AO called on the assessee to furnish source for the cash deposit. The assessee submitted a bank statement in this regard before the AO and the AO noticed from the bank statement that the assessee has invested Rs. 3,13,200/- in the online game through bank accounts. The AO therefore held the balance amount of Rs. 32,83,100/- as unexplained. With regard to the gross winnings, since the assessee could not file the statement the AO made an addition of Rs.1,57,64,297/-. Aggrieved, the assessee filed further appeal before the CIT(A). The CIT(A) deleted the addition made towards gross winnings but sustained addition made towards amount deposited in the game account treated as unexplained by the A.O. The assessee is in appeal before the Tribunal against the order of the CIT(A).

The main contention of the Ld. Authorized Representative (AR) of the before us is that the assessee has a running account in the gaming platform and the winnings are re-deposited into the gaming account. Accordingly, the Ld. AR submitted that the source for the cash deposit is the earlier winnings which the lower authorities failed to consider. The Ld. AR submitted the bank statements from SBI to substantiate the contention that the credits from the gaming platform are used for subsequent deposits. The Ld. AR also

ITA No.2327/Chny/2026 Mahendiran :- 3 -:

contended that the amount deposited by the assessee into the gaming platform for the year under consideration is only Rs.23,44,217/- and not the amount added by the AO.

The Ld. Departmental Representative (DR), on the other hand, submitted that the assessee failed to provide necessary documentary evidence in support of the contention that the credits form the gaming platform are the source for subsequent deposits. Accordingly, the Ld. DR supported the orders of the lower authorities.

We have heard the parties and perused the material available on record. From the perusal of the consolidated statement from the bank account containing details of withdrawals and deposits and also from the perusal of the bank statements page 1 to 59 of paper book, we notice that the assessee has credited amounts from Rummy culture and has also made withdrawals towards Rummy culture. Therefore, we see merit in the submission that the winnings which are deposited in the bank account are the source for the cash deposited into the gaming platform. We further notice that the assessee has used various digital payment mode such as paytm etc. to deposit into the gaming platform which has been considered by the AO as cash deposits. Since the lower authorities have not examined, the deposits and withdrawals from the gaming platform reconciling with the bank statements properly, we are of the considered view that the claim of the assessee needs to be re- examined. Further, the contention that the amount treated as unexplained towards deposits are not correct also needs verification. Accordingly, we remit the issue of deposits into the gaming platform back to the A.O for the limited purpose to check whether the amount deposited and withdrawn from the gaming platform which is routed through the bank account of the assessee

ITA No.2327/Chny/2026 Mahendiran :- 4 -:

with State Bank of India and that the deposit are sourced from the withdrawals. Accordingly, the A.O is directed to take into consideration the withdrawals made from the gaming platform which according to the assessee is the source for subsequent deposits into the gaming platform. The assessee is directed to furnish the bank statement and other relevant details before the A.O in support of the contentions and cooperate with the proceedings. It is ordered accordingly.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 08th day of September, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार िग!र) (पदमावती यस) (Manu Kumar Giri) (Padmavathy.S) �या�यक सद�य / Judicial Member लेखा सद�य /Accountant Member चे�नई/Chennai, �दनांक/Dated: 08th September, 2026. EDN, Sr. P.S Digitally signed by EJTADA DURGA आदेश क� ��त�ल�प अ�े�षत/Copy to: EJTADA DURGA NARESH NARESH Date: 2026.09.15 1. अपीलाथ�/Appellant 12:00:29 +05'30' 2. ��थ�/Respondent 3. आयकर आयु!/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF

MAHENDIRAN,DHARMAPURI vs. ITO, DHARMAPURI

What did the Tribunal hold?

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