KATYAYANI MADHU,WARANGAL vs. ITO, WARD-1, WARANGAL

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ITA 2428/HYD/2025Status: DisposedITAT Hyderabad05 August 2026AY 2017-1816 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged her onus by showing sufficient withdrawals from her bank account and providing details of loan recoveries. The Tribunal found that the authorities below had not conducted further inquiries to disprove the assessee's explanation.

What were the facts?

The assessee, a retired government employee, deposited Rs. 16 lakhs in her bank account during the demonetization period. She claimed the source was past savings and loans advanced earlier and subsequently recovered. The Assessing Officer treated the deposit as unexplained income.

What were the issues?

Whether the cash deposit of Rs. 16 lakhs during demonetization was unexplained income, and if the assessee had provided sufficient evidence to prove the source of funds.

Which sections of the Income-tax Act were involved?

Section 69A,Section 269SS,Section 269T,Section 271D,Section 271E

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD

Before: SHRI VIJAY PAL RAO

Pronounced: 05.08.2026

आदेश / ORDER

This appeal by the Assessee is directed against the order dated 20.11.2025 of the Ld. Addl./JCIT(A)-9, Mumbai, for the assessment year 2017-2018.

2.

The Assessee has raised the following grounds of appeal:

1) “Ground1. On the facts and in the circumstances of the case, the order of the ld. CIT(A) is erroneous both on facts and in law. 2) Ground2. The ld. CIT(A) erred in sustaining the addition made by the AO of Rs.16,00,000 as unexplained money u/s.69A of the Act. 3) Ground3. The authorities failed to appreciate that the sources for the cash deposits are the amounts received back by the Appellant, which are amounts advanced by her earlier as loans. 4) Ground4. Any other ground that may be urged at the time of hearing.”

2.1. The assessee has also raised additional ground which reads as under: "On the facts and circumstances of the case, the AO is not justified in levying tax at increased rate of 60% u/s.115BBE of the Act in as much as the amendments made by the Taxation (Second Amendment) Act, 2016 to Finance Act, 2016 are made effective from the 1 day of April 2017 and are applicable for asst. year 2018- 19 onwards. The authorities below ought not to have applied the same to the asst. year 2017-18". 3. The assessee is an individual and retired from Government service in the year 2001 and filed her return of income for the year under consideration declaring total income of Rs.4,06,630/-. The case of the assessee was selected for scrutiny under CASS as there was cash deposit of Rs.16 lakhs in the bank account of the assessee during the demonetization period. In reply to the show cause notice, the assessee explained the source of the cash deposit as past savings which was given loan to certain persons and received back in the year under consideration. The assessee explained that out of Rs.16 lakhs in the bank account, a sum of Rs.13,68,000/- was loan received back and balance was out of savings of her pension income and withdrawal from the bank account. The Assessing Officer did not accept this explanation of assessee and made the addition of RS.16 lakhs u/sec.69A of the Income Tax Act [in short "the Act"], 1961 to the total income of the assessee. The assessee challenged the action of the Assessing Officer before the learned CIT(A) but could not succeed.

4.

Before the Tribunal, the learned Authorised Representative of the Assessee has submitted that the assessee has furnished details of the source of cash deposit during the demonetization period and referred to the details as placed at Page no.1 of the paper book to show that the assessee has regular withdrawals from the bank account to the tune of Rs.66,71,284/- from the year 2010 to 2017. He has further submitted that even during the year under consideration, the assessee has withdrawn from her bank account to the tune of Rs.21,53,204/- which is more than sufficient for the deposit of Rs.16 lakhs during the demonetization period. The learned Authorised Representative of the Assessee has submitted that the assessee is an old widow of more than 81 years and staying alone as her son is staying separately therefore, the assessee herself is handling her family responsibility including financial affairs. The learned Authorised Representative of the Assessee has referred to the bank account statement of the assessee and submitted that in the year 2011 the assessee has received her retirement benefits/pension arrears to the tune of Rs.5,20,639/- which were immediately withdrawn by the assessee which shows that the assessee used to advance the loan to the known individuals for earning some extra income. The learned Authorised Representative of the Assessee has referred to the details of the persons from whom the assessee has received back the loan amount during the year under consideration and submitted that once the assessee is having regular withdrawals from the bank and there is no re-deposit of cash in the bank account of the assessee except during the demonetization period then, the source explained by the assessee cannot be doubted. Further, the assessee has also filed confirmation of these persons placed at Page nos.35 to 44 of the paper book. Based on the transactions of credits in the bank account and withdrawals by the assessee as well as the assessee’s past savings, the learned Authorised Representative of the Assessee has submitted that the assessee has discharged her onus to prove the source of the cash deposit by producing the relevant details and the confirmation of the persons from whom the assessee has recovered the loan given in the past. The amount of loan given to the persons is also explained by the assessee as sufficient withdrawals were made by the assessee on regular intervals from her bank account and therefore, once the assessee has explained the capacity of the assessee to lend the amount then, due to demonetization declaring Specified Bank Notes [in short “SBNs”] as ceased to be in circulation, the only option for the assessee was to deposit the amount in the bank account of the assessee. Thus, the learned Authorised Representative of the Assessee has submitted that the addition made by the Assessing Officer and sustained by the learned CIT(A) is not justified and liable to be deleted.

5.

On the other hand, the learned DR has submitted that the assessee has claimed the source of the deposit in the bank account to the extent of Rs.13,68,000/- as recovery of the past loan given to the 05 persons. In two instances, the loan was given in the year 2012 and therefore, there is a gap of 04 years between the loan given to the parties and deposit in the bank account. The assessee has failed to produce any documentary evidence in support of the claim except the confirmations which are self-serving. The learned DR has further submitted that the assessee has failed to even establish the nexus between the alleged recovery and the deposit in the bank account. The learned CIT(A) has given the reasons that in the confirmations filed by the assessee there is no reference of any PAN or any loan agreement or any security in the shape of promissory note etc. Therefore, the claim of the assessee as recovered of the loan amount is not acceptable for want of any supporting evidence. The learned DR has further submitted that on the alleged date of loan given by the assessee to these parties there was no bank balance therefore, even there is no direct co-relation between the loans given by the assessee and withdrawal from the bank account. He has relied upon the Orders of the authorities below.

6.

I have considered the rival submissions as well as relevant material on record. The assessee is a senior citizen and widow staying alone and financially dependent on the pension income as the assessee retired from Government service in the year 2001. During the assessment proceedings, the Assessing Officer asked the assessee to explain the source of cash deposit of Rs.16 lakhs during the demonetization period. The assessee has explained the source to the extent of Rs.13,68,000/- as loan received back and balance of Rs.2,32,000/- as past savings of the assessee and withdrawals from the bank. So far as the withdrawals from the bank and past saving of the assessee are concerned, it is manifested from the bank account details of the assessee that the assessee has been withdrawing substantial amounts from her bank account on regular intervals. During the financial year 2010-2011, the assessee received a cheque of Rs.3,50,000/- and immediately there is a withdrawal of cash of Rs.2 lakhs. Further in the financial year 2011-2012 and particularly in the month of June 2011 the assessee has again received an amount of Rs.5,20,639/- as pension arrear fund/retirement benefits which was also withdrawn by the assessee in the month of July 2011. On careful perusal of the bank account statement shows there are regular withdrawals from the bank account of the assessee and even during the financial year 2016-2017, there is a withdrawal of more than Rs.21 lakhs from the bank account of the assessee. The details of the withdrawals from the bank account are summarized at page-1 of the paper book as under:

6.1. Thus, even during the financial year 2016-2017 there is a withdrawal of more than Rs.21 lakhs from the bank account of the assessee which is not in dispute. Though the assessee has explained that an amount of Rs.13,68,000/- was deposited in the bank account as received back loan from the 05 persons the details of which are as under:

6.2. The assessee though filed the confirmations from all these 05 persons but the same were not accepted by the Assessing Officer as well as by the learned CIT(A). Along with the confirmations the assessee also filed the identity proof of these persons in the shape of Aadhaar Card therefore, the existence of these persons whose confirmations are filed is not in dispute and in one case copy of even PAN is also filed. The Assessing Officer has not conducted any further enquiry to verify the veracity of the claim of the assessee regarding the loan given in the preceding years which was recovered during the year and deposited in the bank account in the months of November and December 2016. The learned CIT(A) has given the reasons for confirming the addition in Para nos.5.2 to 5.2.5 as under:

“5.2. After careful consideration of the facts of the case, grounds of appeal, submissions of the Appellant, and documents furnished during appellate proceedings, the following findings emerge: 5.2.1. The bank statements from 2010 to 2015 show certain cash withdrawals; however: The Appellant has not established any nexus between specific withdrawals and the alleged loans claimed to have been advanced. There are no loan agreements, promissory notes, receipts, or correspondence showing that any cash withdrawn was actually handed over as a loan to any person.

Mere withdrawal of cash does not prove that the cash was subsequently advanced as a loan, nor that it remained unutilised for several years until repayment.

Therefore, the bank withdrawals cannot be treated as corroborative evidence of the loan transactions.

5.2.2. The confirmations filed from the four alleged borrowers suffer from several shortcomings:

They do not contain PAN, bank statements, evidence of capacity of the borrowers to repay substantial cash amounts during demonetisation.

All repayments are claimed to be paid in cash, during a period of severe currency restrictions, which raises substantial concern regarding credibility.

The confirmations lack details of dates of loans, mode of giving and repaying, purpose of borrowing, or supporting documents. Accordingly, the confirmations cannot be accepted as reliable proof of the loan or repayment.

5.2.3. The alleged loans were said to have been advanced in 2012-13 and 2015-16. but repaid only during demonetisation in late 2016.

The Appellant has not explained as to why the loans given several years earlier were repaid suddenly during demonetisation, and no bank deposits or transfers were made during earlier years, and how large amount of cash were retained by borrowers for years without any trace. It is also pertinent to note that all these loans were interest free loans. The explanation is not supported by normal human conduct or business practice, and therefore lacks credibility.

5.2.4. The Appellant has failed to satisfactorily establish any of these three ingredients. Envisaged in section 69A, the burden lies entirely on the Appellant to establish:

1.

Identity of the person providing the cash 2. Their capacity 3. Genuineness of the transaction Thus, the AO was correct in treating the cash deposits as unexplained. The explanation offered by the Appellant for the cash deposits is not supported by credible, verifiable evidence. The bank withdrawals and confirmations filed fail to establish that: Loans were actually advanced in earlier years, or Such loans were repaid during the demonetisation period. The AO's addition of Rs.16,00,000 u/s 69A is therefore upheld.

5.2.5. It is further noted that even assuming, without admitting, that the Appellant had actually given loans in cash and received repayments in cash during the demonetization period, such transactions would amount to clear violations of sections 269SS and 269T of the Act. Acceptance or repayment of loans exceeding Rs.20,000 in cash attracts penalty under sections 271D and 271E equal to the amount of loan or repayment.

This further diminishes the credibility of the Appellant's explanation, as no prudent person would engage in large cash loan transactions carrying mandatory penal consequences. The very nature of the alleged transactions renders the explanation improbable and unsubstantiated."

In view of the above discussion the grounds of appeal are dismissed.”

6.3. Thus, the explanation of the assessee was not accepted by the learned CIT(A) on the ground that there is no loan agreement, promissory note, receipt or correspondence showing the transaction of loan given to these persons and thereafter receiving back. The bank account statement is also not considered as corroborative evidence of the loan transaction. It is pertinent to note that once the assessee has produced the relevant details showing sufficient withdrawal from the bank account and assessee being a single widow staying alone without any investment in any other form then, the claim of giving loan to these persons cannot be brushed aside on suspicion. The Assessing Officer has not conducted any further enquiry despite the fact that all the particulars of these persons were produced by assessee in the shape of Aadhaar Card along with confirmations and in one of the cases even PAN of the persons. Therefore, having considered the facts and circumstances of the case and background of the assessee as well as the withdrawals from the bank account of the assessee during the year under consideration itself is more than sufficient to deposit the amount of Rs.16 lakhs in the bank account during the demonetization period, the source and availability of the amount in the hand of the assessee cannot be rejected without bringing any contrary material on record. The Assessing Officer as well as the learned CIT(A) have doubted the explanation and documentary evidence produced by the assessee but has not conducted any further enquiry to disprove the same. Therefore, once the assessee has produced the relevant details as part of the bank account statement and withdrawal from the bank account are not in dispute then, the addition made by the Assessing Officer is not justified. It is also pertinent to note that once the assessee has shown the availability of the cash with the assessee being the withdrawals in the past then, the deposit in the bank account during the demonetization period is a normal behaviour and conduct of a person as there was no other option but to deposit the cash available with the assessee in the bank account of the assessee i.e., State Bank of India. Hence, in the facts and circumstances of the case, the addition made by the Assessing Officer is not justified and the same is deleted.

7.

In the result, appeal filed by the Assessee is allowed.

Order pronounced in the open court on 05.08.2026.

Sd/- VIJAY PAL RAO VICE PRESIDENT Hyderabad, Dated 05th day of August, 2026 VBP Copy to: 1 KATYAYANI MADHU, 11-24-473, POCHAMMAIDHAN, WARANGAL - 506002 TELANGANA ITO, WARD-1, 1-8-610, 3RD FLOOR, MAYURI COMPLEX, OPP. TSNPDCL BHAWAN, NAKKALAGUTTA, 2 HANAMKONDA, WARANGAL-506001, TELANGANA 3 THE PR. CIT, HYDERABAD. 4 THE D.R., ITAT, HYDERABAD SMC-BENCH, HYDERABAD. 5 GUARD FILE Digitally signed TRUE COPY VADREVU by VADREVU PRASADA RAO PRASADA Date: ASSISTANT REGISTRAR / RAO 2026.08.05 I.T.A.T., HYDERABAD 10:49:03 +05'30' 16

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